(MoneyWatch) What can we learn about retirement planning from successful investors? Plenty! Bank of America (BAC) and Merrill Lynch recently published their Affluent Insights Survey of 1,000 investors with assets of $250,000 or more, and the results are indeed insightful.
Any time successful people are willing to share their point of view, I'm interested to see what I can learn. You'll see that these secrets aren't rocket science and can be used by anybody, not just the privileged, to get ahead financially. In fact, these "secrets" are just common sense, offering guidelines on what to do -- and not do -- when it comes to your money. Let's take a look.
Secret No. 1: Redefine retirement
The successful investors consulted for the survey are changing the definition of retirement. Almost three-fourths of respondents who aren't yet retired view this upcoming life stage as a second act during which they plan to work full or part time. Almost 30 percent intend to cycle between work and leisure, 22 percent plan to work at a job they enjoy more than the one they currently have, and 14 percent want to continue working part time in their current job.
About one in four define retirement as never working again, while only 14 percent define retirement as hitting a certain age.
Secret No. 2: Make lifestyle tradeoffs
If given the choice, half of the affluent Americans surveyed who are not yet retired would rather retire later than make tradeoffs in their lifestyle now. But 81 percent would choose to reduce their standard of living when push comes to shove -- as it most certainly will, even for affluent investors. The survey respondents reported a variety of actions they'd be willing to take; each of the following actions would be taken by one-fourth to one-third of the survey respondents:
-- Trim day-to-day expenses
-- Buy fewer luxuries
-- Limit vacations
-- Cut back on entertainment
-- Keep the same car longer
-- Leave less of an inheritance
-- Downsize their home
I contend that these actions won't ruin their lives. Even if they have to implement some of these strategies in order to save enough for retirement, they'll still enjoy a good life.
Secret No. 3: Plan for retirement
Affluent investors who are preparing to retire in the next five years are taking steps to make sure their money lasts during their lifetime. More than one-third of the Merrill Lynch survey respondents are saving more, tracking expenses more closely and developing a monthly budget for living expenses.
While it may seem obvious that you should plan for retirement, various surveys show that only about half of all Americans do any kind of planning before pulling the plug on their job. For example, the 2012 Retirement Confidence Survey from the Employee Benefit Research Institute shows that only 42 percent of survey respondents do any sort of calculation to determine how much money they need to retire or how much they should save for retirement. Yet those respondents who actually did some planning report they feel more confident about their retirement security, and they're making more realistic calculations of their retirement needs.
Secret No. 4: Don't ignore rising health care costs
A majority of the Merrill Lynch survey respondents -- 79 percent -- cited rising health care costs as their top financial concern. Yet among the respondents over age 50, almost two-thirds reported that they haven't yet estimated what their health care costs will be during their retirement years.
Estimating your medical costs during retirement isn't an easy task for those who may be mathematically challenged. But you can get an idea of what your medical costs will be from Fidelity's annual survey of average retiree medical costs. Its 2011 survey estimated that the present value of lifetime, out-of-pocket medical costs for a retired couple age 65 is $230,000.
Some retirement planning software will let you estimate your health-care costs during retirement; one example is the RetireMark software developed by HealthView Services. Rising health care costs are one risk to your retirement security that you just can't ignore.
So now you can use the retirement planning secrets of affluent investors. Start making changes today that will make a difference in your future.
Photo courtesy of iStockphoto contributor RelaxFoto.de.