Many studies focus on how well people are prepared financially for retirement when they retire.
In a different kind of study, the National Bureau of Economic Research looked at the situation in reverse, evaluating how well people were doing financially at their death. According to researchers, nearly half of elderly households — 46.1 percent — had assets under $10,000 when they died. Many households had no housing wealth, relied almost entirely on Social Security benefits for support and were disproportionately in poor health compared with others in the same age group.
Household incomes had not gone down that much since their 50s and 60s in any of the age groups studied — those 65-69, 70-74, 75-79, 80-84 and 85 and over. "Based on a replacement rate comparison, many of these households may be deemed to have been well-prepared for retirement, in the sense that their income in their final years was not substantially lower than their income in their late 50s or early 60s," the study said.
Rather, their low asset levels greatly hindered their ability to pay for unexpected health costs or other financial shocks, as well as "luxury" expenses including travel, entertainment and other leisure activities.
"This raises a question of whether the replacement ratio is a sufficient statistic for the 'adequacy' of retirement preparation," the study said.
The study found both the change in assets and level of assets differs greatly between single households and married couples (married couples fare much better), and that healthier households had also been wealthier at death.
The group that relied almost entirely on Social Security benefits for their retirement also had the lowest value of fixed assets. "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 savings.
"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 concluded.
Supported by a grant from the National Institute of Aging, the research was conducted and the study written by James M. Poterba at Massachusetts Institute of Technology, Steven F. Venti at Dartmouth College and David A. Wise at Harvard University.