Even Millionaires Worry They’ll Outlive Their Retirement Savings

Got more than $1 million saved up, along with prudent investments for the long haul and solid advice from a wealth planner?

That seeming trifecta may not be enough to carry you financially through old age.

At least that’s what one in three American millionaires think, according to a study by Northwestern Mutual released Tuesday. 

Some 33% of Americans age 18 and over with at least $1 million in investable assets — meaning stocks, funds, bonds and cash — fret that they’ll outlive their savings, according to the study. 

The finding means that when it comes to money, the affluent, middle class and struggling pretty much share one thing in common: A separate Northwestern Mutual report released in June found that 43% of Americans of all means have the exact same fear, almost as many as who brood about declining health (44%).

Wealth may be relative — millionaires think they’re poor compared to Elon Musk and his $265 billion; high-income professionals moan they’re barely middle class after paying for mortgages and private school tuitions, and so on. But the general feeling of retirement insecurity in America is universal.

“The emotion is real,” said Vincent Birardi, a wealth advisor at Halbert Hargrove in Long Beach, California. “It’s part of the human psyche to have a certain level of fear.”

What’s broadly dubbed a retirement crisis centers on the 47 million households with older adults — 80% of such households — that are financially struggling today or are at risk of falling into economic insecurity as they age, according to the National Council on Aging.

A National Institute on Retirement Security analysis in July showed that half of Generation X earners, who are now age 43-58, have almost nothing saved for their golden years. The institute also found that finds that millennials (people born between 1981 and 1996) will need to set aside between 15-22% of their income each year in order to have adequate savings in retirement for medical issues, long-term care and bank accounts slimmed by the death of a spouse or divorce. That’s twice as much as was recommended to previous generations.

Northwestern Mutual’s latest study, which focused on high net worth individuals, found that the well-heeled are twice as likely (at 70%) to work with a financial advisor compared to the general population. More than half, or 53%, of respondents consider advisors to be their most trusted source of financial advice, with spouses and partners ranked a distant second at 11%, followed by business news at 10%.

Overall, rich investors and savers use a financial advisor more than four times more than savers of ordinary means, who tend to turn to non-professional sources for advice.  

In theory, those factors should position the wealthy to be better off than savers who stay away from financial planners. A June study by robo advisor Betterment of 1,200 investors across four generations found that one in three, or 31%, get their advice from social media and influencers such as Keith Gill, a YouTube influencer goes by the moniker Roaring Kitty. The same percentage of all respondents reported using a financial advisor.

Millionaires would also seem to have another leg up in the battle against worrying about depleting their savings. Northwestern Mutual found that 84% of such people report having a long-term financial plan that factors for gyrating economic cycles, compared to 52% among the general population.

But the insurer’s study suggests that using an advisor and having robust savings doesn’t solve the worrying-about-the-money-lasting problem.

The common thread between investors of all means is the human life cycle.

A healthy, non-smoking woman age 65 today has a 54% chance of living to age 90, and a 31% chance of making it to 95. Some 13 in 100 women will hit the age 100 mark, according to a chart from JPMorgan Chase based on data from the Society of Actuaries. That means two to three decades of non-earning years by the woman or her working spouse, assuming they’re roughly the same age.

So it’s possible that simply not knowing the odds could be fueling the wealthy’s fear of outlasting their savings. 

“The unreasonable expectation that I see many wealthy retirees have is underestimating how long they may live,” said Matt Ward, a partner and private wealth advisor with Northwestern Mutual’s Beyond Financial Advisors. “IIf they plan to live to age 75 instead of age 95, that gap in planning could leave them vulnerable to retirement risks like inflation, rising health care costs and taxes, a long-term care event, market volatility and more.”

Another common factor: rising consumer prices, which surged to a 40-year high of more than 9% in July 2022 but have since leveled off at roughly 3%.

“Inflation kind of cuts across the economic spectrum,” Birardi said, adding that he had some affluent clients who were having to draw down more from their retirement accounts than expected. “They had assumed a certain annual increase in their expenses that has proven to be too low of an estimate.”