Running out of money in retirement is the top fear for so-called “mass affluent” investors in the U.S., and yet most are not prepared to cut spending to boost their retirement preparedness, reports a new survey from Bank of America Merrill Lynch.
The latest survey of 1,000 U.S. individuals with between US$50,000 and US$250,000 in investable assets found that more than half of respondents (55%) say they’re frightened of not having enough money to sustain them throughout retirement. The fear is more prevalent among women than men (59% compared to 51%), and it is also more common among both baby boomers (aged 51 to 64) and generation X (aged 35-50) at 61%, compared with millennials (aged 18 to 34), where only 41% express concern.
Marital status also has an impact, with 68% of divorced respondents saying they are worried about not having enough money during retirement, compared to 53% of those who are single, married or widowed.
And yet, despite this widespread fear, the survey also found that many investors are unwilling to cut spending on indulgences now in order to invest for retirement. Only 33% said they’d cutback on entertainment, 30% on restaurant meals, and 28% on vacations, in order to bolster their savings.
It also found that 63% of respondents said that having enough money to live “in the here and now” is a bigger priority than saving more for the future; and, that even if investors were to receive a hypothetical million-dollar windfall, it says that only 19% say they would make it a priority to set it aside for retirement.
“Many mass affluent investors are taking more of a ‘live for today’ financial approach than you might expect given their fear of running out of money in retirement,” said Aron Levine, who heads preferred banking and investments at Bank of America. “That type of disconnect might have a significant impact on the long-term financial well-being of these investors.”
In terms of other financial habits, the firm reports that the survey also found that 89% of mass affluent investors say that they set a household budget, but that 66% say they are unable to consistently stay within their budget’s parameters. It notes that paying off debts (31%) and unexpected costs (33%) are the biggest factors disrupting savings plans.
The survey was conducted by Braun Research, Inc. (an independent market research company) and Kelton (an independent global insights firm) between April 8 and April 22.