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Richest Americans Worry Soaring Healthcare Costs
Threaten Retirement
Nearly half plan to work in retirement, says
national survey
April 17, 2006 Even millionaires may find
financial challenges in retirement, primarily, they say, due to rising
health care costs. They also express concern about limits on retirement
enjoyment due to personal and spousal health, according to a landmark
study, "Wealth in America," conducted by Northern Trust, one of the
nation's largest private wealth managers.
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Nine out of ten (90 percent) high-net worth
households are concerned that spiraling health care costs might affect
their ability to enjoy retirement. Additionally, 89 percent reported
that personal and spousal health is a retirement-impacting issue. These
are key findings of Northern's study of 1,014 high net worth households
with $1 million or more of non-real estate, liquid or "investable"
assets.
"Our research shows how critical the issue of
healthcare costs is to everyone, regardless of income," said Tom Hines,
senior vice president and head of Northern's Financial Consulting Group.
"With life expectancies rising, and as many as 30
million individuals expected to reach retirement over the next 10 years
and remain in retirement far longer than previous generations, it's
imperative that families begin factoring in the additional cost of long-
term care, home health care or nursing home care. Without addressing
these possibilities, these costs can rapidly deplete hard-earned wealth
and possibly jeopardize estate plans," said Hines.
In addition to concerns about healthcare, affluent
households also named as potential threats to retirement, a possible
stock market decline (85 percent); inflation (83 percent); tax increases
(81 percent); and terrorism here and abroad (77 percent).
Affluent Households will use 401(k) Plans,
Investments to Fund Retirement, but Plan to Work
According to Northern's survey, 74 percent of
affluent pre-retirees plan to draw income from a 401(k) or other
employer sponsored savings plan to fund their retirement, while nearly
all (92 percent) senior executives expect to withdraw income from these
plans.
In addition, 72 percent of all respondents said
stocks and/or bonds (outside of 401(k) plans) will provide their second
source of retirement income, while 86 percent of senior executives also
plan to draw income from these assets.
"Senior executives may find themselves facing
decisions other pre-retirees don't need to consider," explained Hines.
"For instance, they may have a large portion of
their net worth invested in employer stock and still feel strong ties to
that employer. And for former executives who have a great deal of their
net worth tied up in stock options, this can pose a dilemma: how can
they balance their need to diversify with their desire to maintain
involvement with the company and benefit from its future success?"
Another source of retirement funding named by
millionaires is Social Security and Medicare. Fully 70 percent of
millionaires plan to use Social Security and Medicare payments for
retirement income, but 64 percent are concerned about the future of
these entitlement programs.
Possibly most surprising, a sizeable 48 percent of
pre-retiree affluent households anticipate working either full or
part-time when they retire, compared to 22 percent of households
currently retired who are working full or part-time.
"We're beginning to appreciate that baby boomers
aren't traditional retirees; they plan to be active, whether that means
working, volunteering or continuing to run a business," Hines observed.
"On the other hand, affluent individuals may continue to work to absorb
steep and ever-climbing healthcare costs when they retire."
Retirement Takes on New Meaning
What affluent households plan to do during their
"retirement years" is a question addressed in "Wealth in America."
Besides ensuring a comfortable standard of living, millionaires said
their other important retirement goals are related to social activities,
spending time with children or grandchildren, pursuit of personal
interests and having an active social life. Sixty three percent reported
that spending more time with their families is very important, as is
pursuing a personal interest or hobby (60 percent).
Additional Survey Highlights: Wealth in America
● A majority (76 percent) of affluent household
said their IRA accounts will be a major source of income in retirement,
representing the third most important source of income cited after
401(k) plans and individual stocks/bonds investment portfolios.
● More than half (54 percent) of business owners
said protecting their estate against taxes is an important retirement
goal
● Fifty nine percent of baby boomers (ages 41-59)
are very concerned about rapidly rising healthcare costs
● More than a third - 35 percent - of
millionaires plan to travel abroad when they retire, while 26 percent
will serve as volunteers and
● 21 percent will make charitable gifts
The nationwide study of households with self-stated
$1 million or more in investable assets, conducted for Northern Trust by
Phoenix Marketing, seeks to highlight the issues of importance to
affluent consumers.
A total of 1,014 online questionnaires were
completed among these households. The research, completed November 2005,
has a margin of error of +/- 2.65 percentage points at a 95 percent
level of confidence. Areas covered in the research included investment
attitudes and behaviors, asset allocation, issues of retirement,
philanthropy, use of advisors, and attitudes about success.
Source: Northern Trust Corporation
Northern Trust Personal Financial Services says it is one
of the largest U.S. providers of integrated financial services for high
net-worth individuals, families and family offices, including 22 percent
of the Forbes 400 wealthiest families. Helping clients grow, preserve
and transfer wealth, Northern Trust offers clients an objective,
consultative approach to personal financial management. Its offices are
located within 45 minutes of 53 percent or 1.8 million high net worth
U.S. households. As of December 31, 2005, Northern Trust PFS had assets
under custody of $226 billion, of which $117 billion is managed by
Northern Trust.
Northern Trust Corporation (NASDAQ:NTRS)
is a leading provider of investment management, asset and fund
administration, fiduciary and banking solutions for corporations,
institutions and affluent individuals worldwide. Northern Trust, a
multibank holding company based in Chicago, has a growing network of 84
offices in 18 U.S. states and has international offices in 12 locations
in North America, Europe and the Asia-Pacific region. As of December 31,
2005, Northern Trust had assets under administration of $2.9 trillion,
and assets under investment management of $618 billion. Northern Trust,
founded in 1889, has earned distinction as an industry leader in
combining high-touch service and expertise with innovative products and
technology. For more information, visit
http://www.northerntrust.com/ .
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