According to a survey by Northern Trust, a leading provider of investment management, global custody, fiduciary and private banking services for affluent individuals, affluent baby boomers are planning for retirement, but many without the assistance of professional advisors. When asked who their principal advisor for retirement planning issues related to finances is, nearly half (45 percent) of those age 54 and under said, "myself." More than half (55 percent) of baby boomers said they haven't established or updated their estate plans. (Related article: Retirement planning if you hate to plan)
"We were surprised by the number of affluent baby boomers who are worried about many issues surrounding their ability to retire, yet are not taking action on critical elements of their retirement plans, namely the creation of estate plans," said Thomas Hines, Senior Vice President and head of the Northern Trust Financial Planning Group. "We suggest that this very self-directed group take advantage of the services of seasoned professionals who can help them develop comprehensive financial plans for their needs today and in the future. Indeed, how well one prepares for this next stage in life can determine the quality of their retirement and how much they will have to leave their heirs and to charity." (Related article: How to get started with retirement planning?)
Baby Boomers Plan to Draw From Several Sources to Fund Retirement
More than half (54 percent) of younger millionaire investors plan to draw income from a combination of five or more sources of income to fund retirement, including stocks and bonds, IRA accounts, 401(k) plans and Social Security. Of those, 84 percent plan to use their stock and bond portfolio, while 73 percent plan to use IRAs. Savings in 401(k) plans will be used by 73 percent of baby boomers, a reflection of the plans' popularity among younger executives, business owners and professionals covered by these plans. It is interesting to see that even wealthy Americans look at Social Security as a way to supplement their retirement income. Privatization of Social Security is likely to help wealthy Americans who are savvier at investing.
Reflecting the rise of interest in alternative investments among affluent investors, nearly half (43 percent) of young millionaires, 54 and under, are planning to use real estate investments as a source to fund their retirement, more than double the number of retirees (18 percent) who are currently drawing on this asset. (Related article: Younger Americans likely to benefit from privatization of Social Security)
Millionaires Also Worried Over the Stock Market, Taxes, Personal Health and Inflation
According to Northern's survey, millionaire investors are very worried or somewhat worried that stock market declines, personal and family health, inflation and the possibility of large tax increases, may significantly affect their ability to enjoy retirement. Of greatest worry to 88 percent of non- retirees and 89 percent of retirees is the possibility of stock market declines. An equal number of non-retirees and retirees (79 percent) are worried that personal and family health issues will affect retirement. Worry over inflation ranks high with 80 percent of non-retirees and 76 percent of retired millionaires. And, 75 percent of non-retirees and 76 percent of retirees said that they are worried over large increases in taxes.
These are same concerns that low-income and middle-class Americans have with the private retirement investment accounts that President Bush has proposed as part of his plan for Social Security privatization. It is pretty obvious that very soon, all Americans will be subject to the ups and downs of the stock market.
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