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46% of American retirees have no more than $10,000 in savings at the end of life.
Old 09-01-2012, 11:44 AM   #1
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46% of American retirees have no more than $10,000 in savings at the end of life.

The headline was alarming, and sensationalism sells.

Half of retirees die with little in savings- MSN Money

But:
"That doesn't mean their standard of living is very low -- they might have a relatively generous pension plan, most of them will have Social Security," said James Poterba, professor of economics at the Massachusetts Institute of Technology, president of the National Bureau of Economic Research, and a co-author of the study.

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."
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Old 09-01-2012, 11:50 AM   #2
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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.
It's about time we see one of these "most retirees are broke" put into context. I've said it probably a dozen times here, the usual defined "net worth" is a terrible way to measure readiness for retirement because it generally doesn't include the actuarial cash value of the income streams provided by SS, pensions and annuities. There are plenty of people who receive enough of an income stream from these that they never have to touch their personal savings for income needs, whether they have $1,000 or $1,000,000 saved/invested.

I know elderly people who can barely rub two nickels together in savings, but between SS and their pension they are not hurting at all.

Having said that, I'm not a real fan of including home equity, though I suppose it's a "fallback cushion" if things get tight where you could either sell and downsize your home or take a reverse mortgage.
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Old 09-01-2012, 11:51 AM   #3
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If I die with exactly $10k left then that means all my retirement planning has been perfectly done !
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Old 09-01-2012, 01:15 PM   #4
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If I die with exactly $10k left then that means all my retirement planning has been perfectly done !
Sad! Went to the grave while still trying to decide on your answer to the Let's spend $10K! thread, eh?
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Old 09-01-2012, 01:35 PM   #5
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Originally Posted by bondi688 View Post
The headline was alarming, and sensationalism sells.
Half of retirees die with little in savings- MSN Money
Perhaps the worst effect of this senseless financial porn/slasher-horror attention-grabbing headline to make you click and read for advertising revenue is that many people still only read headlines...or will read a paragraph of a story without really reflecting on it (i.e. if part of the story points out that they die with just $10k, they will concentrate on that and ignore the sentence that points out the pensions/SS effect).

In turn, it does nothing to encourage people to save more. "Why should I worrry? Half of everyone that dies has just $10k to their name! I'm just as bad off as HALF of the other people, so why try to accumulate any wealth or get ahead financially?" Which, in turn, encourages a lifestyle of dependency (on a job, gov't handouts, other support rather than trying to do what you can for yourself).
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Old 09-01-2012, 01:39 PM   #6
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Sad! Went to the grave while still trying to decide on your answer to the Let's spend $10K! thread, eh?
That's because we were not allowed to travel. Else, many would choose to die while taking a cruise or while sunbathing in Nice.
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Old 09-01-2012, 01:57 PM   #7
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If I die with exactly $10k left then that means all my retirement planning has been perfectly done !
It would be even more perfect if your funeral and other final costs are $10,000.01
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Old 09-01-2012, 03:20 PM   #8
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... There are plenty of people who receive enough of an income stream from these that they never have to touch their personal savings for income needs, whether they have $1,000 or $1,000,000 saved/invested.
Knock on wood but that describes my wife and me. Between a Navy pension and two SS checks we get along just fine and manage to stash a lot of the SS $$ in savings. Guess we should have spent more instead of saving/investing during the working years.
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Old 09-01-2012, 03:57 PM   #9
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Those individuals included in the survey, as others have rightly pointed out, often benefited from generous pensions and Social Security, leaving their meager savings as simply the "third leg" of the retirement stool. Today's retirees are enjoying the last pensions most people will ever see, while those looking to retire in the next 10 years will need to save aggressively or work longer to make up for a lack of a pension, decimated retirement savings and Social Security.

The message to take away from the article is that today's generation MUST focus on LBYM and saving aggressively, realities all of us have realized for many years. Unfortunately, the current economy is not conducive to the latter, so LBYM is the name of the game for the foreseeable future.

Yet what happens when young people are left with LBYM as the only way to survive? They delay getting married, having kids, buying houses and cars, etc.... In other words, they unable to participate in at least one of these "coming of age" activities that contribute significantly to the ongoing health economy. Now some might argue that LBYM is never a bad thing, but this is an overly-simplistic viewpoint. One need only look to Japan and other high-saving economies as examples. If people don't spend, then businesses don't sell. Both activities are necessary for a functioning economy.
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