Life Spans, Health Care Costs and Rethinking Retirement
Three out of four affluent Americans would change how they approach money management if they knew they would live to be 100, according to the Merrill Lynch Affluent Insights Survey. Respondents said they would continue working at least part-time and/or re-evaluate their saving and investment strategies if they knew they would become centenarians.
The survey asked more than 1,000 individuals with investable assets of $250,000 or more about their goals and concerns. Many respondents cited the uncertainty of longevity and health care costs as key challenges to their investment strategies. Rising health care costs were cited as a top concern by 79% of respondents. Sixty percent were concerned about ensuring they have enough assets to last throughout their lifetime.
Many respondents said they do not expect to have a source of lifetime income beyond what is supplied by Social Security. As for pensions, just 38% of those under 50 anticipate or currently recieve a pension (versus 57% for those over age 50).
Respondents appeared willing to redefine traditional retirement. Nearly four in 10 would continue to work at least part-time in retirement if they knew they would live to age 100. More than 50% of respondents who had yet to retire planned on either cycling between work and leisure or working in a job they enjoy more (part- or full-time). Just 14% of respondents over the age 50 said they would retire once they hit a certain age.
Notably, providing for children and other family members was a priority. Only one in four respondents said they would be willing to leave a smaller inheritance to ensure they had enough assets to sustain them throughout retirement. Similarly, only 15% of respondents who were planning to retire in the next five years said they would be willing reduce financial support to their adult-age children in exchange for boosting their retirement savings.
With average life spans increasing, it is becoming more important for investors to consider that they could live longer they originally anticipated. This means planning for both near-term and long-term needs.
Source: “Merrill Lynch Affluent Insights Survey,” February 22, 2012, Merrill Lynch Wealth Management.