Don’t Die the Way Half of Americans Do

Everybody should be talking about this, but outside of academic circles, almost nobody is. “This” is a research paper done by three economics professors, one from Harvard, one from MIT, and one from Dartmouth. The research shows that 46% percent of of elderly Americans have less than $10,000 in financial assets in the year of their death. In other words, they basically ran out of money before they ran out of time. Not only is it no fun to be old and broke at the same time, it’s apparently bad for your health, too. The study found that the people with the least financial assets were generally in worse health than those who were more affluent. If you don’t want to be simultaneously old, poor, and sickly, you’ll need to take positive action to avoid being part of that 46%.

The study is called Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts. Okay, maybe that’s  why no one is talking about it; that’s not nearly as compelling a title as, say, Left Behind, Star Wars, or The Incredible Hulk. It is, after all, an academic paper, and it reads with all the page turning suspense you’d expect from a research report — meaning none at all. It won’t be made into a blockbuster movie. It won’t ever become a viral video on YouTube.  Most people will never hear of it. And that’s a shame. Because its contents are too important to overlook. Here are some of the reasons why:

1. It’s about reality, not just projections. While many studies have looked at pre-retirees and tried to ascertain how financially prepared they might be, this one looks at how well off thousands of people actually were at the end of life. Nearly half had neither significant financial assets nor housing wealth. My own anecdotal observations suggest that most people don’t foresee themselves ending up in such straits, meaning many people are probably not as well prepared for retirement reality as they think they are.

2. Not everyone who died broke started out their retirement that way. Many people have money on retirement day, but deplete their assets over fifteen or twenty years of rising living costs. For these people, retirement becomes progressively more uncomfortable as they slowly go broke. The standard of living declines, and with it the perception of quality of life. The study shows this is not a rarity or an anomaly. It’s how nearly half of us end up.

3. People with little or no financial assets usually have a hard time coping with unexpected cash outlays.That elderly couple down the street knows that the paint on their house is peeling, and the lawn is getting weedy. They just can’t afford to maintain their home like they used to.  More importantly, when uninsured medical expenses start to multiply, they start foregoing needed care. Their health suffers. Physical discomforts and worries about health problems cause stress that leads to still more health problems.

While the study has no political or social agenda, it stands as an  indictment of my profession. Both of them, actually. As a financial pro, I shake my head at my industry’s narrow focus on serving high net worth clients. So many “wealth managers”  aren’t interested in taking on clients with less than $1 million (sometimes much more) in assets to invest. Why ignore the people who could benefit most profoundly from professional counsel? It’s the middle class that most desperately needs help to avoid the mistakes that can land them in that ill-fated 46%. The well need not a physician.

I also can’t help but reflect on the fact that I live in a country where at least 52 million people attend church most every Sunday. Yet despite all that scripture has to say about wise money management, I don’t believe that the financial status of Christians as a group is appreciably different from that of everybody else.  Clearly, the motivational scripture sound bites that pass for financial teaching in some Christian circles aren’t doing the trick.

The good news is that these problems are fixable.There are sound strategies that can help you avoid the fate of the 46%. Stick around — we’ll talk about a few of them in the next post.