A Million Dollars to Retire? Even the Wealthy Have Concerns, Finds Survey From Natixis Investment Managers
BOSTON, October 18, 2022 – 2022 is proving a difficult year for many to retire. Americans have suffered steep losses in their 401(k)s and other retirement vehicles this year, calling into question underlying assumptions about saving, spending and investing. Even before the turmoil of this year, high net worth individuals (HNWIs) were concerned about their ability to retire securely. Data on US investors with $1 million in investable assets from a survey conducted by Natixis Investment Managers (IM) suggests that wealthier individuals are preoccupied with their eventual ability to retire comfortably, even with $1 million or more in assets.
$1 Million Isn’t What It Used To Be
Coupled with inflation concerns are rising interest rates, which pose a problem for retirees and savers alike.
“A decade of historically low rates impeded investors’ ability to annuitize assets, leaving many retirees with a less-than-ideal income. It’s true that the overall level is still low from a historical perspective, but rates are now rising on higher government debt. Together with persistent fears of a global recession, we’re seeing new risks emerge,” said Liana Magner, Executive Vice President and Head of Retirement and Institutional in the US. “Those hoping to retire need a new playbook, including education, planning, tools, and policy to meet the retirement crisis.”
Magner also notes that although the impact of inflation and low rates could soften, one thing impacting those living in retirement are rising healthcare costs. The overwhelming majority of those surveyed (65%) acknowledge that healthcare costs and long-term care costs like nursing care will have a big impact on financial security in retirement.
What To Do
The standard rule for retirement drawdowns has long called for the withdrawal of 4% of assets as income in the first year of retirement and then 4% plus the rate of inflation each year for future withdrawals. Using this rule, one million dollars may not be the comfortable cushion many might expect, especially as inflation continues to grow.
“A million may seem like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly,” said Dave Goodsell, Executive Director of the Natixis IM Center for Investor Insight. “This is usually quite a bit less than these individuals are likely used to living on annually. This underscores why it’s so important to work out all the assumptions and do the math early when making plans – and why professional advice is necessary.”
The 60/40 rule, another long-standing investment principle, denotes a portfolio of 60% stocks and 40% bonds. However, this ratio doesn't account for heightened and emerging risks to the equity portion or a low rate environment, which is bad for bonds. Even as rates go up, it will still take time for them to reach a comfortable level for generating a consistent income for retirees. In the meantime, more than half (58%) of high-net-worth respondents recognize that low rates will make it difficult to generate an income off their savings. Investors would likely do better to diversify their holdings, in consultation with a trusted financial advisor.
The “three-legged stool” of retirement funding (Social Security, Employers, Individuals) may also require a shift. Amidst concerns about the long-term viability of Social Security and rising public debt, 31% of respondents believe it will be difficult to make ends meet without Social Security.
Top Tips for Planning a Secure Retirement
To best prepare for a secure retirement, financial professionals suggest the following (taken from the 2022 Natixis Global Survey of Financial Professionals):
The full report, entitled “The million dollar question: How much do I need to retire?” can be found here: https://www.im.natixis.com/us/research/2022-millionaire-report.
Methodology
Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research in March and April 2021. Survey included 8,550 respondents in 24 countries.
About the Natixis Center for Investor Insight
The Natixis Center for Investor Insight is a global research initiative focused on the critical issues shaping today’s investment landscape. The Center examines sentiment and behavior, market outlooks and trends, and risk perceptions of institutional investors, financial professionals and individuals around the world. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.
About Natixis Investment Managers
Natixis Investment Managers’ multi-affiliate approach connects clients to the independent thinking and focused expertise of more than 20 active managers. Ranked among the world’s largest asset managers1 with more than $1.1 trillion assets under management2 (€1.1 trillion), Natixis Investment Managers delivers a diverse range of solutions across asset classes, styles, and vehicles, including innovative environmental, social, and governance (ESG) strategies and products dedicated to advancing sustainable finance. The firm partners with clients in order to understand their unique needs and provide insights and investment solutions tailored to their long-term goals.
Headquartered in Paris and Boston, Natixis Investment Managers is part of the Global Financial Services division of Groupe BPCE, the second-largest banking group in France through the Banque Populaire and Caisse d’Epargne retail networks. Natixis Investment Managers’ affiliated investment management firms include AEW; AlphaSimplex Group; DNCA Investments;3 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions and Natixis Advisors, LLC. Not all offerings are available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.
Natixis Investment Managers’ distribution and service groups include Natixis Distribution, LLC, a limited purpose broker-dealer and the distributor of various US registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.
1 Cerulli Quantitative Update: Global Markets 2022 ranked Natixis Investment Managers as the 18th largest asset manager in the world based on assets under management as of December 31, 2021.
2 Assets under management (“AUM”) of current affiliated entities measured as of June 30, 2022 are $1,156.7 billion (€1,106.7 billion). AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers.
3 A brand of DNCA Finance.
The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted.
$1 Million Isn’t What It Used To Be
- Even though they plan on retiring at the relatively early age of 63, almost six in ten (58%) HNWI say they accept the fact that they may have to work longer than they plan.
- Yet it may not be that easy -- while 58% accept they’ll likely have to work longer than they’d like, 44% worry they won’t be able to.
- More than a third (35%) of millionaires believe “it will take a miracle” to achieve a secure retirement, while almost half (42%) of HNWIs are so worried about retirement security that they avoid thinking about it all together.
Coupled with inflation concerns are rising interest rates, which pose a problem for retirees and savers alike.
“A decade of historically low rates impeded investors’ ability to annuitize assets, leaving many retirees with a less-than-ideal income. It’s true that the overall level is still low from a historical perspective, but rates are now rising on higher government debt. Together with persistent fears of a global recession, we’re seeing new risks emerge,” said Liana Magner, Executive Vice President and Head of Retirement and Institutional in the US. “Those hoping to retire need a new playbook, including education, planning, tools, and policy to meet the retirement crisis.”
Magner also notes that although the impact of inflation and low rates could soften, one thing impacting those living in retirement are rising healthcare costs. The overwhelming majority of those surveyed (65%) acknowledge that healthcare costs and long-term care costs like nursing care will have a big impact on financial security in retirement.
What To Do
The standard rule for retirement drawdowns has long called for the withdrawal of 4% of assets as income in the first year of retirement and then 4% plus the rate of inflation each year for future withdrawals. Using this rule, one million dollars may not be the comfortable cushion many might expect, especially as inflation continues to grow.
“A million may seem like a lot, but many people are surprised when they do the math and realize that 4% of $1 million is only $40,000 yearly,” said Dave Goodsell, Executive Director of the Natixis IM Center for Investor Insight. “This is usually quite a bit less than these individuals are likely used to living on annually. This underscores why it’s so important to work out all the assumptions and do the math early when making plans – and why professional advice is necessary.”
The 60/40 rule, another long-standing investment principle, denotes a portfolio of 60% stocks and 40% bonds. However, this ratio doesn't account for heightened and emerging risks to the equity portion or a low rate environment, which is bad for bonds. Even as rates go up, it will still take time for them to reach a comfortable level for generating a consistent income for retirees. In the meantime, more than half (58%) of high-net-worth respondents recognize that low rates will make it difficult to generate an income off their savings. Investors would likely do better to diversify their holdings, in consultation with a trusted financial advisor.
The “three-legged stool” of retirement funding (Social Security, Employers, Individuals) may also require a shift. Amidst concerns about the long-term viability of Social Security and rising public debt, 31% of respondents believe it will be difficult to make ends meet without Social Security.
Top Tips for Planning a Secure Retirement
To best prepare for a secure retirement, financial professionals suggest the following (taken from the 2022 Natixis Global Survey of Financial Professionals):
- Be mindful of the risks of inflation
- Don’t underestimate your longevity
- Balance risk and conservation of assets with reward and growth
- Set realistic expectations for investment returns
The full report, entitled “The million dollar question: How much do I need to retire?” can be found here: https://www.im.natixis.com/us/research/2022-millionaire-report.
Natixis Investment Managers, Global Survey of Individual Investors conducted by CoreData Research in March and April 2021. Survey included 8,550 respondents in 24 countries.
About the Natixis Center for Investor Insight
The Natixis Center for Investor Insight is a global research initiative focused on the critical issues shaping today’s investment landscape. The Center examines sentiment and behavior, market outlooks and trends, and risk perceptions of institutional investors, financial professionals and individuals around the world. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.
About Natixis Investment Managers
Natixis Investment Managers’ multi-affiliate approach connects clients to the independent thinking and focused expertise of more than 20 active managers. Ranked among the world’s largest asset managers1 with more than $1.1 trillion assets under management2 (€1.1 trillion), Natixis Investment Managers delivers a diverse range of solutions across asset classes, styles, and vehicles, including innovative environmental, social, and governance (ESG) strategies and products dedicated to advancing sustainable finance. The firm partners with clients in order to understand their unique needs and provide insights and investment solutions tailored to their long-term goals.
Headquartered in Paris and Boston, Natixis Investment Managers is part of the Global Financial Services division of Groupe BPCE, the second-largest banking group in France through the Banque Populaire and Caisse d’Epargne retail networks. Natixis Investment Managers’ affiliated investment management firms include AEW; AlphaSimplex Group; DNCA Investments;3 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions and Natixis Advisors, LLC. Not all offerings are available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.
Natixis Investment Managers’ distribution and service groups include Natixis Distribution, LLC, a limited purpose broker-dealer and the distributor of various US registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.
1 Cerulli Quantitative Update: Global Markets 2022 ranked Natixis Investment Managers as the 18th largest asset manager in the world based on assets under management as of December 31, 2021.
2 Assets under management (“AUM”) of current affiliated entities measured as of June 30, 2022 are $1,156.7 billion (€1,106.7 billion). AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers.
3 A brand of DNCA Finance.
The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted.
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