Assets at the End of Life
We find that a substantial fraction of persons die with virtually no financial assets—46.1 percent 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 addition this group is disproportionately in poor health. 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. 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.
More on the NBER Study of the financial status of households approaching retirement age in the National Bureau of Economic Research.
Many people, including members of my family, practice good estate planning especially as the end approaches. It has also been widely reported how to give away most assets in order to game the Medicaid system and receive “free” nursing home and other care.
This could be to several of factors. 1) They may have exhausted their retirement assets; 2) they may have given away assets to liquidate their estate in anticipation of death; or 3) they may have lived hand to mouth in retirement the same way they lived during their productive years.
Its no secret that the elderly are among the most likely age groups to be below the poverty line, despite having a lifetime to have acculmulated savings. Obviously a multitude of factors play into this but it is a little disheartening to think about poor senior citizens having to worry about where their next meal comes from. And yet the government doesnt want them to go to work. Go figure…
Doesn’t ecnomics teach that this is the ideal: you want to reach your death bed having consumed your entire net worth?
A lot of people would probably have more money late in life if they were allowed to invest some of that SS.