Class Discussion and Assignment: A Backwards Look at Retirement

Generally when we look at retirement we focus on whether an individual has enough saved to make it through retirement.  Another way of looking at retirement is to see what Americans have at the end of retirement – do they still have anything left when they die?  This was the approach used in recent research by authors from MIT, Harvard, and Dartmouth, and their results are disturbing – finding that almost half die with virtually no financial assets—in fact, 46.1 percent died with less than $10,000.  In addition, many of these households own nothing in the way of housing and rely almost entirely on Social Security benefits for support.  Not only do they have virtually no financial assets, they are also disproportionally in bad health.  They also found that it was worse for those living alone:

Elderly living alone:

  • 57.0 percent had less than $10,000 in financial assets;
  • 57.1 percent had no home equity.

Two-person households:

  • 31.7 percent had less than $10,000 in financial assets;
  • 20.4 percent had no home equity.

Chris Farrell, the economics editor of Marketplace Money, a personal finance show produced by American Public Media, recently examined this study in the article “More Bad News on Retirement” concluding that the health of Social Security is of utmost importance to many Americans and that relying on 401(k) retirement plans has not worked that well for many Americans.

You will often hear people ask the question “why should I save for my retirement when I might not even live that long?”  The educated, thoughtful answer might be another question… “but what happens if you do?”  Chapter 16 of Personal Finance Turning Money Into Wealth is filled with information on how to approach and execute a plan for retirement saving.  Review some of the eye opening charts and graphs such as “Saving in a Tax-Deferred Retirement Account Versus Saving on a Non-Tax Deferred Basis” and “Skipping Just One Year Can Cost You Almost $235,000”.  You may feel like retirement is a long ways off but if you seriously take a “Backwards Look at Retirement”, saving now for that possibiity may start to make more sense.

Discussion Questions:

  1. What can you do to make sure you don’t fall in with the 46.1 percent with less than $10,000 in financial assets during your final years? Write a 1 page paper with a response to this question.
  2. What are Chris Farrell’s concusions or takeaways?  Do you agree with him? Be prepared to discuss this in class.
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