Not surprisingly, a recent study by Barclays Wealth and Ledbury Research found that high net worth individuals are planning to work longer, with many planning never to retire.
The survey of 2,000 individuals found that 54% of U.S. respondents are among those that plan to never retire. While it appears that the global crisis of the past few years has contributed to this trend, it is not the only reason for the results. This trend had been evident for awhile in part due to rising life expectancies. If someone expects to live 20+ years past the age of 65, it is logical that they will need more money in order to maintain their desired lifestyle throughout their retirement years.
These trends have some important implications for advisors. Longer investment horizons for retirees will impact their asset allocations – not just as they near retirement but throughout their lifetimes. Investors will in general need more growth than in the past. There will be a trade-off: for example, more conservative investments early in life will result in either a later retirement or a more-conservative lifestyle in retirement. Investors need to know their choices as early in their lives as possible.
Especially with where interest rates are today, this phenomenon bodes well for stocks. With housing down as well, there are few places where investors can today grow their portfolios. The yields on many blue chip stocks are very attractive today.
But the investment implications aside, advisors would be well served to visit the retirement discussion with their clients sooner rather than later. It will sometimes be a difficult discussion – and you may have to tell clients things that they do not want to hear – but that is what a true advisor does. The world has changed over the past few years – you need to make sure that you gauge how your clients have as well.
