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

According to yesterday’s Los Angeles Times, nearly half of all Americans will die with practically no money at all. It’s a problem that policymakers and financial services firms must address.

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.

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.

The 75-plus generation is struggling more than others to keep up. Although most age groups have sharply paid down their credit card debt since 2007, credit card debt among the oldest retirees has risen. From 2007 to 2010, AARP found, the percentage of families 75 and older with credit card balances rose from 18.8% to 21.7%; the rate fell in every other age group.

Economist James Poterba of MIT put it all together with colleagues at Dartmouth and Harvard’s Kennedy School and estimated that about 46% of Americans die with less than $10,000 in assets, many of them lacking even home equity and relying almost entirely on Social Security.

The results can be measured in more than merely dollars and cents. Poterba’s paper found that this group is “disproportionately in poor health,” in part because they have no resources to cover medical expenses outside Medicare. Most shocking, many of these households were considered to have entered retirement in good financial shape; they didn’t count on outliving their plans.

There are a lot of people like the folks in this study.  They do not have the health or the money for long term care insurance.  For these folks, Medicaid will be their payer of long term care costs.  They will spend down to impoverishment, cash in life insurance over $1500 worth, and die with nothing.

If these people do not set aside some money into an irrevocable burial trust, their children will collectively pay for the funeral.  Most of these folks do not realize they can protect their burial funds, up to $15,000, this way and spend down to the $2000 Medicaid asset limit.

If you have a loved one in this situation, or know of someone about to enter or perhaps already in nursing care and spending down, some of their money can be protected with the irrevocable funeral trust product.  There is no cost to them for establishing this when they work with TheLongTermCareGuy.com.  Call Romeo Raabe at (920) 884-3030 or (800) 219-9203 to protect some assets.

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