Boomers Take Note: Wealth Fades Quickly For Many Retirees
With the first big wave of baby boomers set to retire in 6 years, many may not have accumulated enough assets to maintain a basic standard of living throughout retirement, new research from the Employee Benefit Research Institute suggests.
EBRI studied data on individuals born between 1931 through 1941, as compiled by the National Institute of Aging, Washington, and the Institute for Social Research at the University of Michigan. Individuals in the study ranged in age from 51 to 61 in 1992, at the beginning of the study period, and had reached age 61 to 71 by 2002.
On the bright side, total wealth among individuals in that group grew by 85% between 1992 and 2002.
Total wealth, referring to all of a households assets (not including their home) minus debts, grew from $235,514 among people in the study group, to about $435,000 in 2002, EBRI found.
For many individuals, however, their accumulated wealth took a bad beating over the years due to the ups and downs of the equity markets, health problems, unemployment, mismanagement of finances and other causes.
EBRI found that 9% of Americans born between 1931 and 1941 lost 100% of their accumulated wealth from 1992 to 2002, while 30% saw this wealth decline 50% or more, and 34% suffered a 25% or more drop.
Although over half of Americans aged 64 to 74 saw their wealth actually grow by 50% or better in the period, a third were either on track to lose their wealth or had already done so, EBRI reports.
EBRI found a significant relationship between declining health and declining wealth.
For instance, people who classified themselves as being in excellent to very good health had accumulated over $573,000 by 2002 on average, compared to $325,000 by those who described themselves as in fair health and only $118,000 of those in poor health.
EBRI found that among the 34% who had a decline of more than one-fourth of their wealth in the period, 36% had been hospitalized, compared to 32% who had not.