Americans Have Raised The Bar On What It Means To be Wealthy

Monday, July 22, 2013 16:10
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Americans Have Raised The Bar On What It Means To be Wealthy

Tags: behavioral finance | financial planning | high net worth

Are you wealthy if you have $1 million? How about $2 million? The majority of investors define wealth as having no financial constraints on what they do. But when asked to assign a dollar amount to being wealthy, they say the number is $5 million.
 

That’s one of the fascinating findings of a just-released report on affluent investors from UBS Wealth Management.

Only 10% of those surveyed said being wealthy means “never having to work again” and another 10% said being wealthy means “ensuring a comfortable lifestyle for the next generation, while 50% of those surveyed agreed that being wealthy means “having no financial constraints on activities.”

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Boy, have Americans raised the bar on what it means to be wealthy! A decade ago or two, someone with $1 million or $2 million would probably have called themselves wealthy. Now, being wealthy requires a lot more money. Being wealthy no longer means being able to retire and live comfortably at age 65. Being wealthy now also means that you’re able to help of the next generation.

“One of the most surprising findings is that four out of five investors are providing financial support for adult children or aging parents,” says UBS in its free report.  “And one in five is sharing a home with those adults. This has a real impact on the definition of a comprehensive financial plan.”

UBS is hitting on a huge financial problem facing retirees: children are moving back in with their parents after college. While raising a child used be a 20 or 25 year financial burden, it’s now widely accepted as commitment for life.

UBS Investor Watch, a quarterly publication, is based on surveys of affluent individuals. Some 4,450 U.S. investors were surveyed for this report from June 23 to July 1, 2013. Investors surveyed are ages 25 and older and said they have at least $250,000 in investable assets; half have at least $1 million in investable assets. Some 2,675 men and 1,775 women participated in the survey. This Investor Watch includes three oversamples: 422 UBS clients, 305 investors in San Diego/Orange County and 329 investors in the Baltimore/Washington metro area, and results were weighted by region and by UBS clients/non-clients to account for these oversamples.

Some other significant takeaways from the survey:
 
While the industry aggregates each investor’s or household’s money into one portfolio and one asset allocation model based on risk tolerance and time horizon, most investors do not view their finances this way.
  • 51% of those surveyed believe the Fed’s plan to cut quantitative easing will have a negative short-term impact, but be stabilizing force in the long-term.
  • Investors’ two top personal finance concerns are long-term care and the finances of their children and grandchildren. Yet investors do not feel adequately prepared regarding these issues.
  • While the industry aggregates each investor’s or household’s money into one portfolio and one asset allocation model based on risk tolerance and time horizon, most investors do not view their finances this way.

 

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