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Going Broke in Retirement Is Top Fear for Americans

Despite Long-term Money Worries, Merrill Edge® Finds Many Won’t Curb Spending Today

Tuesday, May 27, 2014 9:00 am EDT

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"That type of disconnect might have a significant impact on the long-term financial well-being of these investors."

Running out of money in retirement trumps other stress-inducing situations and pressures such as public speaking, gaining weight and going to the dentist for mass affluent Americans, according to the results of Bank of America’s latest Merrill Edge® Report released today. Despite the prospect of not having enough money to live on later in life, many are unwilling to cut spending on indulgences now in order to invest for retirement.

The bi-annual survey conducted among 1,000 mass affluent Americans – individuals with $50,000-$250,000 in investable assets – found that even though many are likely to forego saving for retirement in order to maintain their customary spending habits, the majority of parents surveyed say they would cut spending on themselves in order to help their children. Thirty-five percent have even withdrawn from their own savings/investment accounts to cover children’s expenses.

“Many mass affluent investors are taking more of a ‘live for today’ financial approach than you might expect given their fear of running out of money in retirement,” said Aron Levine, who heads Preferred Banking and Investments at Bank of America. “That type of disconnect might have a significant impact on the long-term financial well-being of these investors.”

When surveyed about long-term financial management topics including their attitudes about making trade-offs, how they prioritize savings and the role finances play in relationships, mass affluent respondents revealed:

  • Respondents say having enough money to live “in the here and now” is a more popular priority (63 percent) than saving more for the future (48 percent).
  • More than a third of women report unexpected costs have gotten in the way of their retirement savings, compared to 28 percent of men.
  • About one in two mass affluent say financial stability is an attractive quality when considering a mate, while others are more likely to be drawn to an appealing sense of humor, money saved or a stable job.

Retirement fears don’t inspire sacrifices

While more than half (55 percent) of respondents surveyed say they’re frightened of not having enough money throughout retirement, many won’t consider cutting back on indulgences such as entertainment (33 percent), eating out (30 percent) and vacations (28 percent). Even if they were to receive a hypothetical million-dollar windfall, only one in five (19 percent) say they would make it a priority to set aside the “found money” for their retirement years.

More women than men (59 percent vs. 51 percent) are frightened about the possibility of not having enough money when they retire. The fear of an uncertain retirement is also most common among 61 percent of Gen Xers (aged 35 - 50) and 61 percent of Boomers (aged 51 - 64); only 41 percent of Millennials (aged 18 - 34) feel this way.

“While the prospect of retirement investing can sometimes feel complex, there are steps that investors can take to help to increase the likelihood that they will have a financially secure retirement,” Levine said. “Laying a solid financial foundation starts with motivation and self-discipline. It’s great that the availability of 401(k) plans serves as the main catalyst to get people saving. Some employers match contributions up to a certain percentage – therefore it’s even more important to contribute at least as much as their employer matches.”

The survey also indicates that the status of a romantic relationship can fuel financial concerns. For example, almost seven in 10 (68 percent) divorced survey participants say they are worried about not having enough money during retirement, compared to 53 percent of respondents who are single, married or widowed.

Mass affluent often find money management complex

According to 43 percent of respondents, choosing among different investment products such as stocks, bonds and exchange-traded funds is the most complicated part of investing. Others say the most difficult part of investing is handling changes in the stock market (33 percent) or understanding how 401(k)s and IRAs (9 percent) work.

In terms of daily financial management, a large majority (89 percent) of mass affluent investors set a household budget, but almost two-thirds (66 percent) of these people say they are unable to consistently stay within their budget parameters. The survey shows that the two most common factors that compete with respondents’ regular retirement savings are paying off debts (31 percent) and handling unexpected costs (33 percent).

Humor tops financial status when picking a mate

The Merrill Edge Report also reveals that priorities vary widely between men and women, especially when it comes to the effects of finances on relationships. Although financial stability is not considered the top quality for mass affluent when choosing a mate, it carries some influence among women. In fact, women are more than twice as likely as men to be attracted to someone with a stable job (51 percent vs. 24 percent) and almost twice as likely to be attracted to someone who has financial stability (64 percent vs. 33 percent). Overall, the mass affluent are most likely to be drawn to an appealing sense of humor (74 percent) or someone with whom they have chemistry with (66 percent), while many are attracted to those with financial stability (49 percent) or money saved (20 percent).

There is also a generational difference when it comes to the importance of finances in selecting a mate. For example, Millennials are more than twice as likely as respondents in other age groups to be attracted to someone who has some money saved (37 percent). And, Gen Xers are more likely than respondents from other age groups to be drawn to people who have financial stability (59 percent).

For more in-depth information about the financial behaviors and priorities of the mass affluent investor, read the entire Merrill Edge Report here.

Merrill Edge Survey Methodology
Braun Research, Inc. (an independent market research company) and Kelton (an independent global insights firm), conducted a nationally-representative telephone survey on behalf of Merrill Edge. The survey was conducted from April 8, 2014, through April 22, 2014, and consisted of 1,000 mass affluent respondents throughout the U.S., defined as individuals with investable assets (value of all cash, savings, mutual funds, CDs, IRAs, stock, bonds and all other types of investments excluding primary home and other real estate investments). Respondents in the study were defined as aged 18 to 34 (Millennials) with investable assets between $50,000 to $250,000 or those aged 18 to 34 who have investable assets of between $20,000 and under $50,000 with an annual income of at least $50,000; or aged 35-plus with investable assets between $50,000 to $250,000. An oversampling of 300 mass affluent were surveyed in San Francisco, Los Angeles, Orange County, CA, Dallas, New Jersey and South Florida. The margin of error is +/- 3.1 percent for the national sample and about +/- 5.7 percent for the oversample markets, with both reported at a 95 percent confidence level.

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