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Literally and technically, one with $1 million in assets is a millionaire, but increasingly, clients believe they need more than that to feel wealthy and to enjoy comfortable retirements.
One million dollars used to be the gold standard in terms of retirement goals. At least that was the figure so many clients aimed for years in search of what they perceived to be a “good retirement.” Many still view $1 million as the benchmark to shoot for in retirement savings, but advisors should note that figure is trending higher in dramatic fashion.
Beyond the $1 million retirement standard, there’s a growing line of demarcation between being a millionaire and feeling wealthy. Sure, wealth can be something of an esoteric concept while millionaire status is achieved with hard numbers, but the point is even millionaires aren’t necessarily feeling as financially wealthy as others expect them to feel.
Familiar Culprits Alter View of Wealthy
It’s often said that inflation most harms those in lower income brackets and that’s true. However, even those that can be viewed as affluent feel some pinch from rising prices.
In its second annual Everyday Wealth in America report, Edelman Financial Engines (EFE) notes that 67% of those surveyed believe they need more than $1 million in assets to feel wealthy. That’s up sharply from 57% last year. There are some age-related factors for advisors to note.
“Is there a difference between what it takes to feel wealthy versus worry-free? We found that this ‘delta’ depends greatly on where you are in life,” according to the study. “The difference is highest for those in their 40’s where the amount to be worry-free ($2.69 million) peaks at nearly $1 million more than what it takes to feel wealthy ($1.73 million). For those in their 60’s and beyond, however, the numbers are reversed. This older segment says feeling wealthy requires more than what it takes to be free of money worries – and this difference peaks at $0.5 million more for those in their 70’s.”
Advisors should note something else about affluent clients and they need to tread carefully here. Wealthy clients are increasingly worried about the 2024 presidential election.
“The current political environment ranks as the #1 worry among affluent individuals (90%) while the 2024 election, specifically, comes in at #3 (81%) on their list of concerns. Similarly, while 31% of Americans overall view politics as the biggest source of stress, nearly half of affluent consumers (47%) echoed the sentiment, making it the #1 stressor across this demographic,” adds EFE.
Helping Clients Get Out of Their Own Way
Helping clients, particularly those of means, feel wealthy can be a tough racket for advisors. A case can even be made that it’s not an advisor’s job to make a client feel wealthy.
One thing advisors can do is help clients avoid regret because financial regret implies avoidable missteps that stand in the way of wealth building. Credit cards are a prime example of a wealth hindrance and that’s a critical point at a time when Americans’ credit card debt is north of $1 trillion – a dubious record.
“According to the research, 39% of Americans across all wealth brackets (and 32% of affluent) identified credit card debt as the biggest obstacle to their ability to build wealth,” concludes EFE. “Meanwhile, 33% overall reported feeling uncomfortable with the amount of debt they accumulated this year, and 24% of affluent feel emotionally burdened with what they put on credit.”
Related: Helping Clients Navigate the Minefield of Online Financial Advice