Merrill Edge® Report Finds Amid Economic
Pressures, Many Willingly Take on Debt, Seek a More Responsible 2016
NEW YORK–(BUSINESS WIRE)–A majority (59 percent) of Americans set a 2015 goal to save for
retirement, but so far this year, less than one-third (31 percent)
achieved that goal, according to a new survey released today by Bank of
America and Merrill Edge.
The latest Merrill
Edge® Report, a survey of more than 1,000 Americans with
investable assets of $50,000 to $250,000, reveals that external economic
pressures and debt they deem worthwhile, such as home or car debt, may
be to blame for derailing financial goals, and that people with the most
time to save seem to be the most impacted.
Nearly half (48 percent) of millennials report the economy most impacts
their savings habits, as opposed to their spending or investing habits.
So far this year, only 27 percent of millennials have been able to save
for retirement. Previous Merrill Edge Reports found that younger
generations were the most likely to anticipate a financially rocky
Overall, more than two in five (42 percent) Americans say the economy
most impacts their spending habits. Many admit their finances could have
been in better shape recently, with 36 percent of respondents saying
they wish they had stuck more to a budget in the last five years. Only
38 percent have paid down debt thus far in 2015, despite more than half
(51 percent) of Americans setting a goal to do so.
“Year over year, we continue to see financial regrets surrounding
extraneous spending, particularly with the youngest generations, and
it’s visibly impacting their ability to pursue long-term financial
goals,” said Aron Levine, head of Merrill Edge at Bank of America. “The
good news is we’re seeing increased optimism heading into 2016 with a
focus on saving and investing, including a decrease in overall spending
and an increasing reluctance to borrow from retirement funds.”
In looking towards 2016, the majority of respondents believe they will
be saving more (68 percent), spending less (67 percent) and investing
more (53 percent) throughout the year. Millennials differ from Gen Xers,
baby boomers and seniors as they anticipate spending more (61 percent
vs. 26 percent) as they save more (88 percent vs. 64 percent) and invest
more (82 percent vs. 48 percent) in the coming year.
Saving toward a lifestyle upgrade in retirement
The biannual survey also found despite current economic pressures on
their finances, the majority of Americans have high aspirations for
their retirement years. Half (50 percent) of those who are saving for
retirement want to upgrade their lifestyle in retirement, as opposed to
just affording the basics.
Even though many non-retirees may have fallen short of 2015 financial
goals, they recognize they are behind and are determined to address
saving in the new year. Among those who are saving for retirement, a
large majority (89 percent) are not comfortable putting off this task
today, and nearly half (47 percent) regret not saving more for
retirement in the last five years.
However, once they do reach retirement, many would not be willing to
sacrifice their lifestyle to minimize expenses – specifically, moving in
with loved ones (54 percent), moving to a cheaper area (26 percent),
moving to a smaller home (23 percent), or setting a budget (20 percent).
This mentality appears to align with current retirees’ financial
attitudes and behaviors, including:
Retirees say putting money away is less of a priority than
non-retirees. Retirees believe that in 2016 they will invest less, not
more (71 percent vs. 31 percent) and save less, not more (49 percent
vs. 21 percent).
Similarly, retirees are more apt than their non-retired counterparts
(73 percent vs. 52 percent) to believe that a big purchase is
worthwhile as long as it doesn’t put them in debt.
Retirees are also notably less likely than those who are not retired
to regret superfluous spending habits over the past five years,
specifically wishing they had spent less on eating out (17 percent vs.
46 percent), clothing (10 percent vs. 28 percent), technology (8
percent vs. 20 percent), cars (7 percent vs. 17 percent) and vacations
(5 percent vs. 19 percent).
Justifying debt to afford worthwhile purchases
Although many people are making concerted savings efforts to live a
better lifestyle in retirement, the survey found that when looking back
over the last five years, only 17 percent of respondents wish they only
made purchases that they could afford. This may be due to the high value
respondents see in large investments they deem to be worthwhile.
Although more than four in five (84 percent) respondents say they would
not be comfortable making expensive purchases today, many say it could
be worthwhile if it lasts a long time (57 percent), has more value in
the future (42 percent) or creates lasting memories (27 percent).
Perhaps due to their social sharing mentality, millennials are nearly
three times as likely as other generations to justify a large expense if
it generates lasting memories (61 percent vs. 21 percent); this
generation is also most likely to see that a big expense is worthwhile
if they feel it’s a once-in-a-lifetime opportunity (55 percent vs. 28
Additionally, the majority of those who incurred debt to pay for large
expenses, such as their children’s education (91 percent), their own
education (88 percent) and cars (80 percent), agree these particular
financial obligations have been “worth it.”
Placing high value on real estate
This same sentiment is true as it relates to the home, as almost all (94
percent) Americans have no regrets about how much they spent on real
estate in the past several years. Similarly, a majority of those who
have gone into debt to pay for their homes (92 percent) and home
improvements or renovations (74 percent) feel these debts were
worthwhile. Most (66 percent) respondents also feel it was justified to
go into debt to afford to move to a new area.
Yet, more than nine in 10 (96 percent) also admit they wouldn’t be
comfortable living in a home that costs more than they can afford today.
“While some debt may make sense to take on, respondents need to be
mindful that debt isn’t always an easy burden to manage,” said Levine.
“Some of the top regrets of respondents this year included wishing they
had paid off debt faster and avoiding going into debt altogether. So
it’s important to keep your level of debt manageable to help balance
spending with saving for retirement.”
For more in-depth information about the financial behaviors and
priorities of mass affluent Americans, read the entire Fall 2015 Merrill
Edge Report or take our poll here.
A complementing infographic is available here.
Merrill Edge Survey Methodology
Braun Research, Inc. conducted a
nationally representative telephone survey on behalf of Merrill Edge.
The survey was conducted from September 8 through September 20, 2015,
and consisted of 1,001 mass affluent respondents throughout the U.S.,
defined as individuals with investable assets (value of all cash,
savings, mutual funds, CDs, IRAs, stock, bonds and all other types of
investments excluding primary home and other real estate investments).
Respondents in the study were defined as aged 18 to 34 (millennials)
with investable assets between $50,000 and $250,000 or those aged 18 to
34 who have investable assets between $20,000 and $50,000 with an annual
income of at least $50,000; or aged 35-plus with investable assets
between $50,000 and $250,000. We conducted an oversampling of 300 mass
affluents in the following markets: San Francisco; Los Angeles; Orange
County, California; Dallas; New Jersey; South Florida; Chicago; and
Phoenix. The markets of Chicago and Phoenix were newly surveyed this
wave. The margin of error is +/- 3.0 percent for the national sample and
about +/- 5.7 percent for the oversample markets, all reported at a 95
percent confidence level.
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