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Retirement Planning > Saving for Retirement

Half of Americans Die With Almost No Assets

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A disturbing study, largely overlooked, from three Ivy League researchers finds that almost half of Americans die owning less than $10,000.

The study’s authors, James Poterba of MIT, Steven Venti of Dartmouth and David Wise of Harvard, wrote in February that they found “a substantial fraction of persons die with virtually no financial assets—46.1% with less than $10,000—and many of these households also have no housing wealth and rely almost entirely on Social Security benefits for support.”

In “Were They Prepared For Retirement?,” the authors note that, based on a replacement rate comparison, many of these households are deemed to be well-prepared for retirement, in the sense that their income in their final years was about equal to their income in their late 50s or early 60s.

“Yet with such low asset levels, they would have little capacity to pay for unanticipated needs such as health expenses or other financial shocks or to pay for entertainment, travel, or other activities. This raises a question of whether the replacement ratio is a sufficient statistic for the ‘adequacy’ of retirement preparation.”

The likelihood that those in poor health will be in poverty is much greater than those in good health, the authors observe. However, total income in the last year of life is, on average, only about 50% of income in the preretirement years.

“These persons balance on only one leg of the oft touted three-legged stool that is said to provide retirement support—Social Security, pension benefits and personal saving. If the one leg is judged inadequate it raises the question of how to strengthen the other legs, which in turn may, for example, increase interest in the spread of 401(k)-like plans to low-wage workers in firms with high turnover.”

The study was released by the nonpartisan National Bureau of Economic Research, an organization generally known for calling the beginning and end of economic recessions.


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