Are all millionaires confident in their financial plans?

Nearly half of the millionaires surveyed believe their financial plans need improvement. This is according to the Northwestern Mutual's 2024 Planning & Progress Study,  which explores Americans' attitudes, behaviors and perspectives on many issues that impact their long-term financial security.

A look at American millionaires

The study pointed out that instead of feeling rich, American millionaires – those with at least $1 million in investable assets – are far more likely to exhibit feelings of financial clarity and preparedness than the general population.  In addition, millionaires are much more likely to work with a financial advisor (69%), which is more than double the percentage of the general population (33%). The study also found that millionaires who have a financial advisor feel even clearer and more confident in their financial future than millionaires who do not consult with a financial expert.

“For most Americans, ‘feeling like a million bucks’ is less about believing you’re rich and more about exuding confidence and clarity about the future,” said John Roberts, chief field officer at Northwestern Mutual. “But for many millionaires, money alone doesn’t create clarity – financial plans do. When people have a comprehensive plan that’s custom-built for their life, and an advisor who helps them to see their opportunities and blind spots, feelings of anxiety fall and feelings of security rise. It’s about having a plan to enjoy today without sacrificing tomorrow. These feelings are not reserved for only wealthy Americans. It’s accessible to everyone.”

So why do so many millionaires believe that their financial plans need improvement? “If your peer group includes mostly people with structured financial plans, then you are likely to see your own inadequacies, “said Justin Neal who is the CEO, partner & private wealth advisor of Northwestern Mutual’s Sozo Private Wealth & Insurance Services in Atlanta, Georgia.

As Neal explained millionaires’ desire for enhanced financial plans, he said: “I look at it this way: You may be relatively fit, but if you go hang out with Olympic swimmers for an afternoon, you will probably go home discouraged and feeling overweight! Millionaires hang out with other millionaires. The Northwestern Mutual 2024 Planning and Progress Study reports that these people are more planned and more confident about their plans, which probably creates the impression that no matter where you are, there is more for you to do.”

Neal added that before he became a runner, he had conversations with people about what it means to run fast and where we fit on the spectrum. “After years of running, I am intensely aware that I am not fast! When I inevitably demur about my foot speed, friends will scoff at my false humility, but I understand the lived reality of what “fast” looks like and how unattainable it is,” he said.

Neal believes the industry is observing a similar phenomenon, when the Planning and Progress Study reports that 48% of millionaires believe their financial plan needs improvement. Wealthy people often spend time with people in similar situations and those people have above-average structure and design to their financial roadmaps, he added.

Enhancing millionaires’ financial plans

And what areas should financial advisors focus on as they work with their millionaire clients to enhance their financial plans and move them toward their financial security goals? First, it is easy to talk about investments and growing wealth, Neal pointed out. In contrast, it is difficult to talk about dying and estate planning, or to have a conversation with your parents, spouse and children about money. “When we help people address these challenging things in life, they know their planning has improved. This is true for millionaires and everyone else. Deal with the hard things and that will make all the difference,” he said.

Second, advisors are oftentimes putting the right plans in place, but their clients do not realize it or do not remember it, Neal said. “When we talk,” he added, “I like to just pause and ask if there are any topics or areas that are important to them, to make sure we are talking about what actually matters. And I consistently walk through a few highlights of our work so they can hear how much progress they have made through our partnership. We need to be reminded of how our close relationships have impacted us and how they have changed over time. It is hard to see your children aging until you look at a picture from years ago, and then the growth and maturity become starkly apparent.”

Top retirement questions of millionaires

The survey also shared a few questions that millionaires have about retirement. The #1 “burning question” they have about retirement is: “How will taxes impact me?” This question comes ahead of: “How much money will I need to retire comfortably?” and “Is it possible I could outlive my savings? which ranked #2 and #3, respectively.

Six in ten millionaires said they have a plan to reduce the taxes they will owe on their retirement savings. These plans include:

• Making withdrawals strategically from traditional and Roth accounts to keep yourself in a lower tax bracket (44%)
• Using a mix of traditional and Roth retirement accounts (37%)
• Making charitable donations strategically, for instance taking advantage of bunching itemized deductions (27%)
• Using a Health Savings Account (HSA) or other tax-advantaged healthcare account (24%)
• Using products like permanent life insurance or annuities for their tax benefits (24%)
• Making Roth conversions prior to taking RMDs or Social Security (23%)
• Using qualified charitable distributions from an IRA (22 %)
• Making contributions to other tax-advantaged accounts like a 529 (17%)
• Using the basis paid into the cash value of permanent life insurance to keep yourself in a lower tax bracket (19%)
• Taking advantage of a Qualified Longevity Annuity Contract (QLAC) to set aside funds for later in retirement (17%)

The 2024 Planning & Progress Study was conducted by The Harris Poll on behalf of Northwestern Mutual among 4,588 U.S. adults aged 18 or older. The survey was conducted online between January 3 and January 17, 2024.

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