Retirees Aren't Running Out Of Money. But Why? - Forbes Article (2015, state)
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Sounds like the plutocrat rag "Forbes" is trying to convince people that we must not expand social security.
Did you actually read the article? It sure doesn't sound like it. Without getting into a debate about whether "plutocrat rag" is a good description of Forbes Magazine, the article in question has data and charts on all income levels, divided into quintiles.
I believe someone else has already expressed surprise that the top quintile begins at $62,000 and change. Does anyone have an explanation for that astounding figure? Yes, I get it that most people's income is lower in retirement than while working, but the thought that a retirement income of $62,000 makes one a 20 percenter just doesn't compute.
Did you actually read the article? It sure doesn't sound like it. Without getting into a debate about whether "plutocrat rag" is a good description of Forbes Magazine, the article in question has data and charts on all income levels, divided into quintiles.
I believe someone else has already expressed surprise that the top quintile begins at $62,000 and change. Does anyone have an explanation for that astounding figure? Yes, I get it that most people's income is lower in retirement than while working, but the thought that a retirement income of $62,000 makes one a 20 percenter just doesn't compute.
I went to the link of the actual study and found this:
Sample. The sample was limited to retirees between the ages of 65 and 701 in the year 2000 who provided complete responses to the CAMS questions. The total sample included 835 respondents. Respondents were split into quintiles based on the retiree’s level of financial assets. There were 187 respondents in the first quintile of financial assets, 145 in the second, 170 in the third, 166 in the fourth, and 167 in the fifth. By separating the sample into quintiles we were able to analyze the consumption gap more thoroughly by allowing for variation in both the level of financial assets and the asset allocation strategy. Comparative descriptive statistics on the whole sample age 65 to 70 from the HRS and the sub-sample used in this analysis are provided in Appendix 1. The descriptive results indicate that the sample used here was representative of the population.
The study consistently refers to assets and not income and appears to be based on studying draw down rates of assets. It does not appear to be referring to income as the presented OP article suggest. It appears to be literary license on the part of the Forbes author. Also it is based on data from the year 2000 which was a significantly different market than today.
When: March 11, 2000 to October 9, 2002
Where: Silicon Valley (for the most part)
Percentage Lost From Peak to Bottom: The Nasdaq Composite lost 78% of its value as it fell from 5046.86 to 1114.11.
So if that is your beginning point to do long term data you can expect to observe long term behavior that reflects a traumatic event like that. Even if not invested in more risky assets you still observed the carnage around you and probably adjusted your behavior accordingly. Senior now may risk the opposite as a result of being to conservative in a low fixed rate environment.
I hope this is helpful and makes some logical sense.
As several posters have said in other posts, it is difficult for many people to force themselves to spend after so many years of savings. Spending goes against everything we have done to save for retirement.
I don't think that the figure of 62k is an anomaly. If the median income in this country for a family is 54k a year, why would the majority of retirees have more money in retirement than they had during their earning years. The median SS benefit in 2014 was a touch over 14k a year, so, a couple would have about 29k per year in SS benefits. I don't think it's that much of a stretch to believe that only 20 percent have 35k or more a year in spendable assets.
The majority of posters in this forum do not represent the majority of people in this country.
As several posters have said in other posts, it is difficult for many people to force themselves to spend after so many years of savings. Spending goes against everything we have done to save for retirement.
I don't think that the figure of 62k is an anomaly. If the median income in this country for a family is 54k a year, why would the majority of retirees have more money in retirement than they had during their earning years. The median SS benefit in 2014 was a touch over 14k a year, so, a couple would have about 29k per year in SS benefits. I don't think it's that much of a stretch to believe that only 20 percent have 35k or more a year in spendable assets.
The majority of posters in this forum do not represent the majority of people in this country.
As I noted earlier the data is based on year 2000 assets not today.
The study consistently refers to assets and not income and appears to be based on studying draw down rates of assets. It does not appear to be referring to income as the presented OP article suggest. It appears to be literary license on the part of the Forbes author. Also it is based on data from the year 2000 which was a significantly different market than today.
I thought that income as defined in the study was legitimate given the focus:
Quote:
Total income was made up of wages, income from employer-sponsored retirement accounts, Social Security, worker’s compensation, unemployment benefits, and capital income from businesses and investments.
What is obviously missing is the draw, but the authors' point seems to be that the average indicates that many people don't spend enough to require drawing down savings. Note that I said "many people" and avoided what seems like an obvious conclusion and saying "most". I think stratifying by assets and then using averages for income and expenses is a flaw in presenting the findings. Like you and others, I was initially surprised that the average income of the top tier wasn't higher. But someone retiring with a large fund balance that takes their SS early will be in that group and have a low "income".
I thought that income as defined in the study was legitimate given the focus:What is obviously missing is the draw, but the authors' point seems to be that the average indicates that many people don't spend enough to require drawing down savings. Note that I said "many people" and avoided what seems like an obvious conclusion and saying "most". I think stratifying by assets and then using averages for income and expenses is a flaw in presenting the findings. Like you and others, I was initially surprised that the average income of the top tier wasn't higher. But someone retiring with a large fund balance that takes their SS early will be in that group and have a low "income".
On average, retirees in the lowest income group within each financial asset quintile consumed more than their income in a given year.
Which seems to imply that they got income for each year. I couldn't find an explicit statement. About the only place they broke anything down into years was one chart that had spending.
Last edited by ReachTheBeach; 07-15-2016 at 05:42 AM..
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