Half of retirees die with little in savings
About 46% of American retirees have no more than $10,000 in savings at the end of life.
This post comes from Andrea Coombes at partner site MarketWatch.
Almost half of U.S. retirees die with savings of $10,000 or less, but that grim finding doesn't fully describe the variability and uncertainty that characterize retirement in America, according to a recent study.
While some retirees struggle profoundly, living at or below the poverty line, others enjoy wealth and health -- in fact, the two are strongly linked -- while still others have little in savings but enjoy a decent income, according to the report (.pdf file), based on a survey that tracked retirees from 1993 through 2008.
While 46% of retirees have no more than $10,000 in savings when they die, "That doesn't mean their standard of living is very low -- they might have a relatively generous pension plan, (and) most of them will have Social Security," said James Poterba, a professor of economics at the Massachusetts Institute of Technology, the president of the National Bureau of Economic Research, and a co-author of the study.
But the findings "suggest something about the financial resiliency of these households," Poterba added. "They may not have much capacity to absorb a shock, such as an out-of-pocket medical expenditure. They don't have very much in the way of liquid assets they can access."
When net worth is measured -- including savings, home equity, the value of Social Security and pension benefits, and more -- retirees' financial picture around the time of death looks less bleak. Single people had average assets of about $142,000, those whose spouse had died previously had average assets of $253,000, and couples where the surveyed retiree had died but the other spouse was still living had average assets of $692,000, according to the study.
"You can't generalize that the elderly are not doing very well financially or that the elderly are doing fine. There is a lot of variation within the group," Poterba said. "There is a clear group of households that have relatively low income and also have low financial assets. At the other end is a group that has financial assets that are more than sufficient to accommodate any shocks."
Policymakers and financial advisers, take note. "One-size-fits-all solutions are unlikely to really capture the flavor of what's here," Poterba said. (Post continues below.)
Incomes in flux
Another worrisome finding: the degree to which some retirees face a steep drop in income. While single people and married couples saw their retirement income remain fairly steady, on average, that was not the case for retirees whose spouse had died.
Their income dropped almost 75% between 1993 and the last year of being surveyed. The study doesn't explain why that happens, though Poterba hazarded a guess that it might be related to a drop in pension benefits when the first spouse dies.
If you want the best retirement outcome possible, get rich. If that fails, consider getting married, staying married -- and doing your best to die before your spouse does. That last is not entirely serious, but the general take-away is that being married pays off in retirement.
For example, remember that 46% of retirees who had just $10,000 in savings when they died? That jumps to 57% for people who were single throughout the course of the survey.
Married couples are likelier to have home equity, too. Overall, in the last year before death, 57% of single-person households and 50% of surviving spouses had no housing wealth when they died. But retirees who died before their spouse did? Just 20% lacked home equity, the study said.
"The group who does the best in terms of average level of financial assets are those who are married when we first see them, remain married when the first person dies, and we're looking at the first spouse to die. They tend to have higher income levels," Poterba said. "Single individuals on average have lower levels of retirement income as well as lower financial assets."
But perhaps the study's most striking finding was a "strong and consistent" relationship between wealth and survival. If you're rich, you're much likelier to live longer.
"The relationship between wealth when first observed and subsequent mortality is striking," the study said.
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Folks need to provide for their own retirement. That means living within your means. My wife and I earn salaries of $125,000 and $52,000. We both max our 401K - $17,000 each. plus we invest montly dollar cost averaging. We also stash a few bucks a month into savings. We drive a 2006 and a 2010 car - both are paid off. No credit card debt - no credit cards. No Cable TV. No home phone. No smart phone. No tablet. No smoking. No drinking at a bar. No expensive coffees - make it at home for cents on the dollar. Eat out one meal a week - not 2 meals a day. We mow our own lawn. We clean our own house. No debts at all except for our house and that is gone in 3 years. I work a second job to earn some additional income.
We are 49 and 42 years old and there is no reason folks cannot be more self sufficient. cancel Cable - you don't need it. Cancel the smart phone - you don't need it. Quit drinking at the bar - expensive and dangerous. Do you really need the tablet? Of course not. Check out books, cd's and dvd's at the Library for FREE. Learn to differentiate between a need and a want. Most "things" are wants. Not needs.
I guess we are greedy as our investments approach 7 figures but guess what - you will never have to pay for my family to exist. And I'm getting damn tired of paying for yours.
Course on the other hand - dieing with no money is pretty good planning - you will have enjoyed every dollar you ever earned.
Way to much money in the bank when you die.
I'm taking the equity out of my house when I get older and leaving nothing to no one!!
My whole life I thought my name was "Gimmie"
I hope to die with just enough money left to pay the last of the bills. My kids do not expect an inheritance. I made it, I spend it. When did kids start to expect an inheritance? I see elderly not paying for things that they need, to be able to leave their kids and grandkids money. They saved for the rainy day and never recognize it.
I've read alot of arrogant posts on here and I think everyone needs just one reminder:
Any of us are just one disaster away from bankruptcy! If you think you have all those bases covered, I have a piece of swampland to sell you.
I have spent 31 years putting ten percent of my income into a retirement account. And now as I near a time when I should be able to retire and feel comfortable I am being demonized by the POTUS. And now earlier in the day some young liberal says it is time to make the older people hording all the money pay up. I am now making pennies in interest income and am losing value to inflation. I did exactly what I was told, work hard and save. I am now not sure I will even dare retire. I wasn't asked my opinion of NAFTA. I would have said no or even some minor amount for developmnet of some economies. I wasn't asked to loan people making $50,000 a year $600,000 for a home. I wasn't asked if it was okay for federally funded and insured banks to make casino mentality trading with our money. I was not a part of these decisions but I stay up late and worry about my mother and my kids let alone myself. So when I hear you folks touting your favorite politicians I wonder what the hell is the matter with you people. They all are in this game to benefit themselves and all the power they can get to keep it. To get you people arguing back and forth to me looks senseless. These people are just our employees and need to be treated as such. You listen to them they say they will do this and they don't you vote them out. We need to have an adult relationship with these people.
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