Many have warned that Americans haven't saved enough to maintain their lifestyles during retirement. But the Los Angeles Times says there's more horrifying news: Nearly half of Americans will outlive their assets, dying virtually broke.
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The retirement crisis is not a future event. "The oldest are suffering a great deal now,” said Debra Whitman, an AARP financial expert.
During a recent presentation, the Times said Whitman explained people 75 and older are struggling in the current economic environment and it will get worse as they try to stretch their assets to cover longer lives.
Rising debt levels among older Americans serve as one piece of evidence of the problem.
According to the AARP, the percentage of those 75 and older with credit card balances rose from 2007 to 2010. But the rate fell in every other age group during that time.
Debt nearly doubled for families headed by individuals 75 and over, rising from $13,665 to $27,409 from 2007 to 2010, Fox Business said a report from the Employee Benefit Research Institute found.
But it's not just the people who failed to prepare that face financial difficulties and the prospect of dying poor. This dismal outlook extends to many households that met the traditional standards for secure retirement income.
Whitman said research found that Americans age 75 and older lost one-third of their household financial assets and one-sixth of their net worth as a result of the financial crisis.
The retirement crisis is now magnifying into a late-retirement crisis partly because of changes to pension plans, said the Times.
With the demise of defined-benefit plans went the fixed monthly stipends based on earnings and work history. With the rise of defined contribution plans came a system where retirement income depends on how much a person contributes and how the contributions are invested.
Aggravating matters are years of low interest rates, since fixed rate assets, such as bonds, have been a top choice for investing pension funds.
Americans have been repairing their personal finances since 2010, but older people have less time to recoup their losses and fewer options.
AARP data show 60 percent of Americans 80 and older rely on Social Security for more than half their annual income.
The average Social Security benefit check for a retired worker was around $1,230 per month in 2012. Fox Business said that translates into a mere $14,760 a year, before Uncle Sam takes a cut.
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“Looking at their amount of debt is high, but look at the other side of that balance sheet,” certified financial planner Michael Keating told Fox Business.
“So many are relying on that as their only income, so they are adding more debt and piling on. The lack of income during the golden years is astounding,” he added.
The Times said one report Whitman discussed found that about 46 percent of Americans die with less than $10,000 in assets, often without home equity and relying almost entirely on Social Security.
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