Rising health care costs hit home as concern even with wealthy who now fear costs will affect ability to enjoy retirement

CHICAGO, April 17 /PRNewswire-FirstCall/ -- Health related issues, in the form of rapidly rising health care costs and personal and spousal health, may significantly affect the ability of high net worth households to enjoy retirement, according to a landmark study, "Wealth in America," conducted by Northern Trust, (Nachrichten) one of the nation's largest private wealth managers.

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.

Northern Trust Personal Financial Services 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 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/  .