Northwestern’s 2023 Planning & Progress Study, based on a poll of 2,740 U.S. adults, found that one-third of millionaires surveyed think it’s possible they could outlive their savings. In this case, “millionaire” means you have more than $1 million in investable assets.
Nearly half of millionaires (47%) say their financial planning still needs improvement. That’s the case even though 42% consider themselves “highly disciplined” planners, which is more than twice the percentage of the general population. Odder still, 70% of wealthy Americans work with a professional financial advisor — and yet one-third still worry about running out of money in retirement.
Wealthy Americans May Not Be Convinced They’ve Got the Right Financial Planner On Board
One problem is that many wealthy people aren’t sure they’ve hired the right financial advisor in the first place. According to the Northwestern study, nearly half (48%) of wealthy people who work with an advisor said that if they were seeking a change, they’d choose another advisor who could offer more comprehensive financial guidance than their current advisor. About one-third (34%) would switch to someone who has a better understanding of their life stage and priorities.
“It’s wise for the wealthy to seek out a second opinion about the strength of their financial plans,” Northwestern exec Aditi Javeri Gokhale said in a news release. “Periods of uncertainty like the one we’re in now are spurring people to take inventory about the choices they’ve made and reconsider if their advisors are the right fit for them. As more affluent Americans intentionally seek out comprehensive financial advice instead of individual financial products, I expect to see this trend of second-opinion-seekers to grow.”
The Northwestern study isn’t the only one to raise fears of retirees outliving their money. An earlier study from Cerulli Associates found that more than half (58%) of retirees and retirement savers worry about the possibility of outliving their assets, CNBC reported. It’s an especially big concern for baby boomers and Gen Xers who have either reached or are nearing retirement age.
These concerns have caused 46% of workers to retire later than expected to meet income or savings needs, according to Cerulli’s research.
The wealthy also trust and work with financial advisors at a far greater rate. The study found that 70% of millionaires versus 37% of the general population work with a financial advisor.
This effectively means the top 1% are those with more than $10 million (~25m) and the top 0.1% are those with roughly $1 billion. There are estimated to be a little over 8 million households in the US with a net worth of $3 million or more. I very much doubt that any of them have that amount in savings.
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees-which a retiree with $4 million in assets would fall into-can expect to pay about 22.7% in state and federal taxes.
Despite holding more than half of the nation's wealth, many boomers don't have enough money to cover the costs of long-term care, and 43% of 55- to 64-year-olds had no retirement savings at all in 2022. That year, 30% of people over 65 were economically insecure, meaning they made less than $27,180 for a single person.
If your personal fortune includes millions of dollars and a yacht or two, you may be the ideal candidate for working with a wealth advisor. Wealth advisors are the financial professionals whom affluent individuals often turn to when they need assistance managing their fortunes.
But, if you're already working with an advisor, the simplest way to determine whether a 1% fee is reasonable may be to look at what they've helped you accomplish. For example, if they've consistently helped you to earn a 12% return in your portfolio for five years running, then 1% may be a bargain.
In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved. If you're looking to be in the minority but aren't sure how to get started on that savings goal, consider working with a financial advisor. What Does the Average Retiree Have Saved?
The Federal Reserve also measures median and mean (average) savings across other types of financial assets. According to the data, the average 70-year-old has approximately: $60,000 in transaction accounts (including checking and savings)$127,000 in certificate of deposit (CD) accounts.
If you have more than $1 million saved in retirement accounts, you are in the top 3% of retirees. According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
Yes, it is possible to retire comfortably on $500k. This amount allows for an annual withdrawal of $20,000 from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.
Looking to retire on $4 million? If you leave work at 61, the average retirement age as of the latest Gallup data, you'll have more than enough to see you through to a life expectancy of 90 or even 100. Across 29 years, $4 million could equate to a generous $11,494 a month.
Fidelity also reported that the number of 401(k) accounts with balances of at least $1 million rose in the fourth quarter by 20%, to 422,000 accounts; and by 41% for the whole year. The average account balance for this group was $1,551,300 in the fourth quarter.
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
A common mistake boomers make is to start dipping into their Social Security too early, Ringbauer said. If you take Social Security at the earliest age of 62, you make about 30% less than if you would have waited until 67.
Graduating college, getting married, expanding your family and starting a business are some major life events that might cause you to reevaluate your financial situation. A financial advisor can help you manage these life events while making sure you get or stay on track.
Overall, the survey found that only 30% of consumers have a paid financial advisor. Those most likely to pay for an advisor include consumers with incomes of $100,000 or more (55%) and college graduates (41%).
Key Points. Less than 10% of active large-cap fund managers have outperformed the S&P 500 over the last 15 years. The biggest drag on investment returns is unavoidable, but you can minimize it if you're smart. Here's what to look for when choosing a simple investment that can beat the Wall Street pros.
Introduction: My name is Fr. Dewey Fisher, I am a powerful, open, faithful, combative, spotless, faithful, fair person who loves writing and wants to share my knowledge and understanding with you.
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