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/ .