Many Americans Die With 'Virtually No Financial Assets'

(Newsroom America) -- A paper co-authored by an MIT economist shows that a large portion of America’s older population has very little savings in bank accounts, stocks and bonds, and dies “with virtually no financial assets” to their names.

About 46 percent of senior citizens in the United States have less than $10,000 in financial assets when they die, according to the study co-authored by James Poterba of MIT, Steven Venti of Dartmouth College, and David A. Wise of Harvard University.

Most of these people rely almost totally on Social Security payments as their only formal means of support.

That means many seniors have almost no independent ability to withstand financial shocks, such as expensive medical treatments that may not be covered by Medicare or Medicaid, or other unexpected, costly events.

“There are substantial groups that have basically no financial cushion as they are reaching their latest years,” says Poterba, the Mitsui Professor of Economics at MIT.

However, the study — one of the first to examine Americans’ end-of-life finances — also reveals a diversity of outcomes among senior citizens.

Between 1993 and 2008, it found, unmarried older individuals had median wealth of about $165,000 roughly a year before they died — a figure that includes current and future Social Security income, job-related pension benefits, home equity and financial assets.

In the same period, the median wealth for continuously married senior citizens, roughly a year before they died, was more than $600,000.

“There is a lot of divergence in how people are doing,” Poterba says. Those disparities also complicate the public-policy issues relating to the new findings.

“One of the clear messages is that it is very hard to do a one-size-fits-all retirement policy,” Poterba says. “We need to recognize that, for example, if we were to substantially reduce Social Security benefits for those later in life, that there is a share of the elderly households for whom that would translate very directly into reduced income, because they seem to have accumulated little in the way of financial resources.”

The paper appears as a chapter in a book edited by Wise — “Investigations in the Economics of Aging” — newly published by the University of Chicago Press.

The study also revealed a “strong correspondence” between wealth in 1993 and the length of time that people lived. That relationship held true across a variety of asset classes: People whose homes were worth more, who had larger retirement incomes, and who had more financial savings all tended to live longer than those who had fewer assets.

While there is, Poterba observes, a “very active debate” among social scientists about the precise causal relationship between wealth and health, the study helps confirm, he notes, that “the patterns of health status in these years are quite persistent.”

The research was supported by a grant from the National Institute of Aging. Poterba serves as a trustee of the College Retirement Equity Fund and the TIAA-CREF mutual funds, which offer retirement savings products to consumers.