Concerned About Retirement and Health Care Costs?

OCEAN CITY — With a modest recovery taking hold, affluent Americans are generally fretting less about the economy and meeting their financial goals — but they’re still far from optimistic about their financial well-being, according to the most recent Merrill Lynch Affluent Insights Quarterly (AIQ) survey.

"People still worry about the sustainability of the economy’s improvement and have big questions about what to do next," says Sallie Krawcheck, president of Bank of America Global Wealth and Investment Management. "There’s a lot of free-floating anxiety out there."

Shaken by the market meltdown and sizable portfolio losses, investors are preoccupied with whether they’ll have enough for retirement and how rising health care costs will affect their retirement savings. So finds the March 2010 AIQ survey, which looks at the values, financial priorities and concerns of 1,000 Americans holding $250,000 or more in investments.

These are the issues that concern them most:

The nest egg won’t last. Six in 10 respondents (61%) reported anxiety about the possibility of outliving their assets. Affluent pre-retirees between the ages of 51 and 64 were most concerned with the longevity of their assets (73%) and their ability to afford the retirement lifestyle they have envisioned (61%). Not surprisingly, four in 10 respondents said they expected to retire later than they did when answering the same question a year ago — perhaps partly because nearly one-third are currently supporting both children and parents to some degree. More than 45% of these people, often called the "sandwich generation," said they’ve made significant financial sacrifices on behalf of their family.

Health care expenses will soar. Despite recent passage of a reform bill, 62% of all respondents — including 72% of pre-retirees (ages 51 to 64) — cited rising health care expenses as their primary concern. More than half (56%) were worried about the impact of future costs on their lives in retirement, a sharp jump from 40% in January. Women were far more concerned than men (70% vs. 54%). The respondents’ anxiety may stem partly from a lack of confidence in social institutions. Nearly 70% of those between the ages of 35 and 50 believe that Medicare will not be around to protect them later in life, and almost half are skeptical about Social Security.

Their cash flow will run dry. Having enough to maintain their lifestyles topped the list of short-term concerns for 36% of the affluent Americans surveyed. Pre-retirees were the group most worried about having enough to cover regular monthly expenses. But although they recognize that credit and lending options may be available to help them get through a crunch, many (42%) said they don’t take full advantage of those options.

Retirees need more help. When asked what the government is doing to help Americans save more and earlier in their lives, more than half the respondents (52%) said not enough.

The good news is that those polled are taking a more active role in shaping their retirement plans. Of the 44% of respondents who work with financial advisors, a full 75% of those are engaging with advisors at least quarterly, and 41% at least monthly. What’s more, the percentage who speak once a week or more with their advisor has risen sharply in the past six months, from 8% to 13%. So at the very least, they’re not just letting themselves worry — they’re taking pro-active steps to address their anxieties.

(A Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)