A new economic study has found that nearly half of Americans reach the end of their lives with virtually no assets, relying entirely on government programs like Social Security, Medicare and Medicaid. The results indicate that any changes to these safety net programs would indeed threaten the welfare of older Americans.
Indeed, about 46 percent of senior citizens in the United States have less than $10,000 in financial assets when they die. Most of these people rely almost totally on Social Security payments as their only formal means of support, according to the newly published study , co-authored by James Poterba of MIT, Steven Venti of Dartmouth College, and David A. Wise of Harvard University.
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.
Given the costs of funerals, it's fair to say that less than $10,000 is virtually penniless. The study also confirmed, but couldn't pinpoint, the relationship between wealth and longevity:
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.”
Finally, the replacement of fixed-pension plans with 401Ks may make this situation even more dire in the future, as market fluctuations hurt individual finances.