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A Crisis For The Very Old: They're Outliving Their Assets

Wednesday, July 17, 2013 - 6:26 AM
As if you haven't been scared enough by the projections that most Americans haven't saved enough to maintain their lifestyles as they enter retirement, here's something even more terrifying:

Nearly half of all Americans will outlive their assets, dying with practically no money at all.

Even more worrisome, that's true even among households that met the traditional standards for secure retirement income. Economic factors and changes in employer pensions and in economic reality have made it much harder to stretch income and assets so they last, especially as people live longer.

A crisis for the very old: They're outliving their assets - latimes.com
8
ShorebreakShorebreak2,608 posts since
Apr 6, 2010
Rep Points: 14,135
1. Wednesday, July 17, 2013 - 7:24 AM
"Nearly half of all Americans will outlive their assets, dying with practically no money at all."

At least they evidently have some money. Many of us retired with company pensions, even though  some were very small. We could have IRA's since the 70's and many even had 401k's and savings.  It seems to me that my generation is complaining so much about not saving enough or that we lost so much in the market.  If we did not have enough saved  we should not be in the market.  Didn't any of us remember-- only put in the market what you can afford to loose?  Think of the generations behind us that have fewer jobs, less food, many have lost thier homes. We are the generation that mostly had pensions, healthcare, paid vacations.  When we lost our jobs during a slow down, the company took us back as things picked up.  We  had cheap college educations. What has happened?  We complain about the choices we made. At least we had choices. We are the generation that had everything. How many of us babysit for our grandchildren saving our children babysitting expenses? How many of us make a meal or two a week and run it over to our children and their families?  How many of us offer to run the grandkids to their school events giving the parents a night off.  We should think of our children and grandchildren that most likely will not be able to have the retirement that we have. 

For the life of me I cannot understand if the professional money managers working for  corporate America could not make money for the company pensions but  these some corporations  expect ordinary workers to be able to manage their 401K plans and hand over the money to the same managers that could not make money for their companies. Why should the workers fund these companies and see many of these investors loose everything.  401k's I believe will be found to be  a failed experiment. We need Ken's site. 
7
Ally6770Ally6770911 posts since
Jan 16, 2010
Rep Points: 2,651
2. Wednesday, July 17, 2013 - 7:38 AM
Too many hidden fees bleed 401(k) investors

http://www.dailygazette.net/stand...ion=Opinio
5
ShorebreakShorebreak2,608 posts since
Apr 6, 2010
Rep Points: 14,135
3. Wednesday, July 17, 2013 - 7:59 AM
Thanks Shorebreak. This is the actually CNN article that your link refers to.

 

http://www.cnn.com/2012/06/27/opinion/hiltonsmith-retirement-savings
2
Ally6770Ally6770911 posts since
Jan 16, 2010
Rep Points: 2,651
4. Wednesday, July 17, 2013 - 8:41 AM
"dying with practically no money at all."

Maybe these people listened to the same money managers I used to read years ago.  Their theory was that one should save for a set amount of years, retire, spend, and do one's best to die with as little money left as possible.  Of course, they didn't believe in leaving an inheritance to one's children.  Of course, that turned me off.  My theory is to spend as little as possible toward the end (as if anyone knows when that will be) and try to put aside whatever one can to leave for your children or an adult child.  Unfortunately since interest rates have crashed and seem doomed to stay down for an unknown period, trying to do this is almost impossible.

I do not know why anyone who has tried to save and has savings should fear "running out of money".  We pay our taxes so that those who are truly in need can be taken care of with all the government help available.  So if and when these others "run out of money", they can always turn for government assistance.  "Running out of money" at least means they did try to save and did not spend their lives on government assistance.   I'm sure those who are, would like to have this worry about money.
2
paoli2paoli21,370 posts since
Aug 10, 2011
Rep Points: 6,004
5. Wednesday, July 17, 2013 - 10:51 AM
"The facts are sobering. According to studies Whitman presented last week at a Financial Security Summit organized by the Aspen Institute, Americans ages 75 and older lost one-third of their household financial assets and one-sixth of their net worth from 2007 to 2010, reflecting the devastation of the 2008 crash. Their balance sheets may have improved since then, but obviously they have less time than other age groups to make up the losses."

Don't count on it.  It is the same group of people who bailed out at the bottom of the stock market in 2008 and never came back, turning paper loss to real loss. 

The sad part is that most of us are educated (by so-called financail experts) that one should put all or most of the retirement investment in the stock market (the long term perspectives favor the stock market over the fixed income).  So people listened and did it accordingly.  When they found out the terrible loss, most got panic and ran out of the stock market.  No, it is no longer long-term potential gain but short-term real loss for those folks. 

I woke up many years ago and realized that (1) retirement savings are real money as other money and should be treated as such, (2) nobody cares about your retirement fund except yourself, thus spend time to learn, make mistakes, and develop your own investment strategy, (3) never take the herd mentality and buy high/sell low; it is NOT an emotional game of greed/fear.  On the contrary, stay with your own carefully-developed strategy (stay the course) no matter what.  Most Americans were fooled by the retirement investing "guidelines" and "group thinking" (by financail experts) and lost it all.  The minority realized it is not the (120 - age) equity coverage rule that will save us (it actually will ruin us!), but invest smartly and invest prudently that will sustain us for the ultimate prosperous retirement.

For example, is the current market a safe one to put money in or it is a risky one to sell?  Should one sell all the bonds?  One's strategy should be independent of such a conjecture/decision and all the other daily noise. 
5
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
6. Wednesday, July 17, 2013 - 11:34 AM
Why are people that are 75 years old in the market?  They certainly cannot afford to loose money if that is all they had. If it was extra money then they knew the risks.

If these money managers were right they why are they working? They would be independently weathly. Saving and conserving is the only sure way. 
4
Ally6770Ally6770911 posts since
Jan 16, 2010
Rep Points: 2,651
7. Wednesday, July 17, 2013 - 1:14 PM
Rosie:    "Saving and conserving is the only sure way."

But for how long?  There has to be a time period in the equation for "spending" too.  I always made a place for spending while one is still young enough to enjoy whatever it is one enjoys.   I also have a time element when saving stops too.  Now living frugally and conserving never stops.  It becomes a way of life and a habit I don't ever intend on giving up.   Holding on to what one has already been able to save is also top priority with me.  There is going to come a time in everyone's life where they don't have the years left to make up loses so this should be a priority.
4
paoli2paoli21,370 posts since
Aug 10, 2011
Rep Points: 6,004
8. Wednesday, July 17, 2013 - 2:38 PM
Why are people that are 75 years old in the market?  They certainly cannot afford to loose money if that is all they had. If it was extra money then they knew the risks.

According to "financial experts", the "120 - age" would give an equity coverage of 45% for the 75-year-old group.  Even the most conservative "100 - age" rule gives an equity coverage of 25%.  Benjamin Graham advocated a minimum of 25% equity coverage at all age and at any time.

The reasoning behind it is mainly to fight inflation.  I question the wisdom as follows.  If one diligently saves for retirement, one will have a large sum of accumulative retirement fund by the age of 75.  One of the retirees I know had $3M at least around 2008 (just a case for demonstration).  For $3M, the minimum 25% will be $750K is equity.  With a loss of say 50% in the worst time of 2008, he lost $375K.  that was staggering, even with a minimum of 25% equity coverage.

My point is (1) do not listen to all the claimed wisdom of so-called experts.  (2) invest at one's comfort level (with the worst-case scenario).  (3) maintain one's health the best one can.

7
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
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