Smart SpendingSmart Spending

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.

By MSN Money Partner Aug 31, 2012 2:09PM

This post comes from Andrea Coombes at partner site MarketWatch.

 

MarketWatch on MSN MoneyAlmost 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.

 

Image: Close-up of a senior man looking sad © George Doyle/Stockbyte/Getty ImagesWhile 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.

 

Get married

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.

 

More on MarketWatch and MSN Money:

211Comments
Sep 5, 2012 2:57PM
avatar
cropduster you been inhaling to much of that DDT ... sit down and take another big toke on that joint and youll feel much better in the morning .....
Sep 5, 2012 2:49PM
avatar
According to Mitt Romney's own words,(he's not worried about the poor,they have plenty of help.) But he is worried about the ultra rich paying more in taxes and wants to lay off hundreds of thousands of middle class workers from the federal government by eliminating such depts. as The Department of Education,EPA,U.S. Chamber of Commerce to name a few. Deregulation is another top priority of his so to sum up his plan as I understand it,More dropouts,dirty air,water,food, no trade policy another big hit to the middle class economy,let big buisness ,big banks,the stock market run amuck again and get us into another war,all while smiling and blaming the democrats.
Sep 5, 2012 2:48PM
avatar

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.

Sep 5, 2012 2:46PM
avatar

My goodness (maybe), how can anyone put this any simpler than that oldster toiled working a physically demanding, brain numbing job for 35 years only to get $1k a month in social security. The women have it even worse having beied secretaries, nurses and teachers in lower paying jobs.

 

 

GET REAL AND DROP THE PSYCHOPATH COMMENTS!

 

SOME OF THESE FOLKS EVEN HAD PENSIONS!

 

YOUR WHINING, SCHEMING AND CHEATING RUINED IT FOR EVERYONE...WHAT FEW PENSIONS ARE FAILING, SOCIAL SECURITY WILL FAIL EARLY FROM BEING BLED DRY BY MENTAL ABUSERS/SHRINKS AND WAGES ARE AT ALL TIME LOW...WORK YOUR **** OFF NOW AND YOU'LL STILL END UP EATING CAT FOOD OUT OF THE CAN WHEN RETIRED. I KNOW YOU ARE MIDDLE MANAGER GETTING BIG BUCKS TO FLIRT WITH THE HELP AND LOOK AT THIS AT WORK AS I'M THE PERSON TO WHOM YOU DELEGATED ALL YOUR WORK YOU LAZY BUMB! 

 

Sep 5, 2012 2:46PM
avatar
I will have enough to retire because I worked and saved all my life. I didn't rely on the government or anyone else. Too many people in this country sit around a wait for a hand out. Get off your butts and do something about it.
Sep 5, 2012 2:37PM
avatar
With how much and at what age did Mittens "retire" again????
Sep 5, 2012 2:36PM
avatar
All you need is enough money to burry your old butt with. At least uncle Berry   o or Nancy p DOESN'T GET IT !!!~
Sep 5, 2012 2:35PM
avatar
Do people have nothing better to do than to analyze how much money people have if they are single, married or widowed at retirement?  Life is not a statistic.  Jsut because you fit a certain label doesn't mean you will end up the way the formula says you will.  Be smart and save for retirement and stop posting stupid stories like this.  People are not statistics.
Sep 5, 2012 2:33PM
avatar
Perhaps little is left because over the past 10 years savings have received almost nothing in the way of yield, i.e. interest paid by the banks holding and using our money. So many seniors have had to spend down their savings so other people could be provided with "cheap money" to invest "speculate" in the stock market & real estate. Thanks a bunch to our wonderful folks in DC & the FED.
Sep 5, 2012 2:32PM
avatar
When aricles talk about "average" savings or "average" assets it misses the point. The wealthy skew the "averages" upward.....the median is what we need to focus on and it sure appears the median old person lives pretty clse to the edge...without SS & Medicare most wld fall over that edge.
Sep 5, 2012 2:31PM
avatar
So what? Were they planning on taking it with them??  Oh, wait, I know. They should have left a big chunk for Obama to take so he could fund the entitlement generation of libs commig in the next wave! I'd rather burn it!
Sep 5, 2012 2:08PM
avatar

Little savings that would probable be nice. I truly expect die completely in debit up to my eyeballs. I feel sorry for my next to kin.

Sep 5, 2012 1:53PM
avatar

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.

 

Sep 5, 2012 1:52PM
avatar
But you have to ask yourself, are you really better off than you were in 2008??? 
I 'm sure the hell not!
Sep 5, 2012 1:34PM
avatar

I have a Durable Power of Attorney to handle my parents' business affairs now that they are both in the nursing home.  Though they never did much right business-wise, the one thing they did do right was purchase a long-term care insurance policy in 1995.  That policy is now paying about 2/3 of their nursing home care, which including prescriptions, runs nearly $5K per month for EACH of them.  Social Security and a small amount of other income currently makes their nursing-home care about a break-even proposition.

 

Ideally, a person would spend their last dime on the day of their death, but life is much more uncertain than that.  The insurance policy that the folks bought might make the difference between their heirs (my brother and I) inheriting something vs. inheriting nothing.

Sep 4, 2012 9:36AM
avatar

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"

Sep 3, 2012 1:55PM
avatar
I want the last check I write before I die to bounce!
Sep 3, 2012 11:46AM
avatar
I can't think of a reason to leave any $$ behind when I go.
Sep 2, 2012 10:47PM
avatar
That's the idea isn't it.  Skid into the grave the same way we came.  Naked and broke
Sep 2, 2012 12:01PM
avatar
I am trying to take care of my elderly mother.  Her care needs have finally elipsed her income (which is more than my own) & I am having to apply to Medicaid to help.    Because of the way it is set-up, she will not even be able to afford a perm & manicure a month even though she will be paying for more than 1/2 of her care o/o her own "pocket".   The government will make her a beggar before it helps.   The reason the elderly die without any savings is that they have to spend it all, or give it to the government.  You might as well spend it while you can enjoy it.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

ABOUT SMART SPENDING

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More