And the Rich Get Smarter…

Mass Affluent Americans Pursuing More Aggressive Retirement Goals Instead of Paying Off Debt

October 29, 2013 – -NEW YORK–(BUSINESS WIRE)–Retirement investing has moved back to the top of the financial to-do list for mass affluent Americans, according to Bank of America’s latest Merrill Edge® Report released today. As this group of investors increasingly finds its financial equilibrium, paying off debt slides to second place. While preparing for retirement is a priority for both men and women, on average, men anticipate saving $232,000 more than women do even though both plan to retire at the age of 66.

“It’s encouraging to see that mass affluent investors are switching to a long-term view of their finances and that they are looking to place their debt behind them,” said Alok Prasad, head of Merrill Edge. “As the economy continues to come out of the downturn that began in 2008, this is a good time for both men and women to establish better money habits and set challenging, but realistic, retirement goals.”

Read the entire Merrill Edge Report here

The Merrill Edge Report Fall 2013, a semi-annual study of the financial concerns and priorities of the mass affluent (consumers with $50,000-$250,000 in investable assets), also found that retirement goals vary widely from region to region within the U.S. Respondents in the Western U.S. have set their sights the highest, planning to save more than $1 million for retirement, while Northeast respondents revealed the most modest goals, anticipating to save around $500,000. In the second highest bracket, mass affluent in the Southern region anticipate saving $780,000, and Midwest respondents are aiming to save $595,000.

Setting aggressive retirement goals, yet there is a gap in current savings

When it comes to retirement, overall the mass affluent anticipate saving more than $700,000 for retirement, but currently only have about $160,000 saved. This data suggests there is a gap between retirement goals and actual savings. As the numbers show, many mass affluent will need to close the gap to pursue their target retirement goals.

Even as the economy slowly improves, the number of respondents planning to delay retirement is still growing. Sixty-one percent of respondents now intend to retire later than originally anticipated, a 6 percent increase from the Merrill Edge Report Spring 2013. In addition, when asked what retirement investments the mass affluent are primarily using to prepare for retirement, 32 percent said a 401(k), 22 percent said personal investments (stocks, bonds, etc.) and 17 percent said an IRA.

Parents and grandparents should teach children good money habits

Half of the mass affluent cited that they learned financial literacy the hard way. After managing their finances through trial and error, 88 percent now believe that parents and grandparents should play a more active role in imparting financial knowledge to their children. Seventy-one percent also said that it is important to teach financial literacy lessons by the age of 18. In addition, 40 percent of the mass affluent get their financial information and guidance from a financial professional, while 28 percent seek advice from friends and family. This trend remains consistent with findings from the Merrill Edge Report Spring 2013.

“Investors of all ages are telling us that they want to take control of their financial goals while simplifying their financial lives,” said Prasad. “Whether it’s with a Merrill Edge Financial Solutions Advisor, a friend, or online money management tools, mass affluent investors are taking a hands-on approach to saving and investing. And, with a lifetime of financial lessons learned, they want to pass their wisdom down to the next generation.”

When it comes to the day-to-day behaviors that lead to long-term financial success, of the 68 percent of respondents who have a monthly budget, nearly 90 percent said they stick to it. However, a generational gap emerged here. Eighty-three percent of Gen Y (ages 18 – 34) mass affluent are on a budget, while only 57 percent of those over 65 are following a budget. However, both Gen Y and those over 65 are focused on meeting their long-term financial goals by living a more frugal lifestyle (37 percent of Gen Y, and 61 percent of respondents ages 65+) and paying off credit card bills each month (37 percent of Gen Y, 61 percent of respondents ages 65+).

Shifting their financial priorities from shorter-term debt obligations to longer-term investments

The mass affluent have undergone a shift in their financial priorities since the 2008 economic downturn, moving their focus from shorter-term debt obligations, such as credit cards, to longer-term investments for retirement. Retirement is the top financial focus for the mass affluent today (39 percent), followed by paying down debt (26 percent). This represents a reversal of priorities from 2008.

Not only is retirement top-of-mind for the mass affluent, but they are becoming more aggressive in planning for retirement. Seventy-two percent cited saving enough to live the lifestyle they want in retirement as their top long-term goal. In addition, in the short term, the majority (77 percent) of the mass affluent are looking to actively grow their retirement nest egg in the next 12 months, with 30 percent already planning to put their tax refund toward retirement.

Forty-four percent of respondents listed paying off debt as their top financial accomplishment within the past year. In addition, in terms of measuring financial success, mass affluent would sooner brag about being debt-free (26 percent) than about the size of their savings accounts (22 percent).

Many supporting their children and grandchildren financially, and letting adult children live at home

By financially assisting their children, the long-term financial progress that the mass affluent are making may be hampered. Many mass affluent say they are currently supporting their children and grandchildren financially or letting adult children live at home. Whether it’s because of need or generosity, the mass affluent plan to contribute financially to their family members by helping pay for their children’s college (41 percent), establishing savings account for their grandchildren (34 percent) and letting their children live at home after high school or college (27 percent).

Interestingly, Gen Y respondents showed they are more willing (44 percent) to let their future adult children live at home than other generations (42 percent of Gen X ages 35–50, 31 percent of baby boomers ages 51–64, 9 percent of respondents ages 65+).

Debt incurred for a college education is still worth it

Across generations, the mass affluent agree that a college education is worth going into debt for, and nearly a third plan to rely heavily on student loans. Despite the rising costs of a four-year college education, the majority of the mass affluent (63 percent) think it’s worth it for a parent and/or child to take on debt to attend college. There does not appear to be a generational divide on the subject, with large majorities of the mass affluent believing in the value of a college education.

On average, the mass affluent have saved or are planning to save about $63,000 toward their child’s college education. They plan to fund their child’s college education with a combination of personal savings (38 percent), scholarships or grants (37 percent) and student loans (31 percent).

For more complete, in-depth information about the mass affluent and how this segment is prioritizing and saving for retirement, read the entire Merrill Edge Report here.


Further Resources
More and more Americans are concerned about budgeting, building healthy credit, saving for education and retirement, and learning how to better manage their finances. Bank of America and leading online educator, Khan Academy, have joined forces to create, a different kind of learning experience to help improve financial literacy that’s simple, conversational and self-paced. Khan Academy has mastered taking complex topics and making them simple and approachable. Better Money Habits™ takes that same approach and applies it to personal finance, providing consumers an easier way to establish and maintain healthier financial lives and better money habits. is open to all consumers and includes videos and tools on the site that are narrated in straightforward language, providing readily digestible information.

Merrill Edge Report Methodology
Braun Research, Inc. conducted the Merrill Edge Report survey by phone between September 9, 2013 and September 17, 2013 on behalf of Merrill Edge. Braun contacted a nationally representative sample of 1,016 Americans in the United States with investable assets between $50,000 and $249,999, and oversampled 300 mass affluent in Los Angeles, Orange County, Calif., San Francisco, Dallas, Northern New Jersey and South Florida. The margin of error is +/- 3.1 percent for the national sample and +/- 5.7 percent for the oversample markets, with both reported at a 95 percent confidence level.

Bank of America
Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. We serve approximately 51 million consumer and small business relationships with approximately 5,200 retail banking offices and approximately 16,200 ATMs and award-winning online banking with 30 million active users and more than 14 million mobile users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.