Posts Tagged "net worth"

Unexpected Retirement Costs Can be Big

Four high cost eventsResourceful retirees usually weather the financial surprises that come their way. But a handful of unexpected health events can really hurt.

The death of a spouse is at the top of the list. Net worth drops by more than $30,000 over a couple of years as retirees pay for the extraordinary medical and other expenses surrounding a spouse’s death.

Two serious health conditions also deplete retirees’ assets: strokes and lung disease, which strike about one in five older Americans during their lifetimes, according to a National Bureau of Economic Research study funded by the U.S. Social Security Administration that tracked changes in the finances of people 65 and over.

Despite the presence of Medicare, a first-time stroke reduces a retired household’s average wealth by more than $25,000 – or 6 percent – and lung disease reduces it by about $29,000.

Net worth in this study includes financial assets and home equity minus debts.

These estimates of the cost of various events provide new information about a few of the many unknowns that go into retirement planning. Workers who may think they are saving enough to cover their routine retirement expenses don’t necessarily factor in medical and related costs that are difficult or impossible to predict.

Taken together, single and married retirees will use anywhere from 3 percent to 14 percent of their wealth to pay these unpredictable expenses. But wealthy retirees, who can afford first-rate care, spend much more than the average, while poor people, who have Medicaid to supplement their Medicare, spend very little. …Learn More

Photo of tornado damage in Beavercreek, OH

Why Americans Can’t Come Up with $400

In Beavercreek, Ohio, the cleanup from a recent tornado has begun. But debris is still piled high on many residents’ lawns.

“What we’re seeing following this tornado is people not having enough cash to pay upfront for house debris removal even though insurance companies will reimburse them,” former mayor Brian Jarvis said on Twitter. The debris cleanup comes on top of other costs like temporary housing in this city east of Dayton.

Much was made recently of a survey in which four of every 10 American families said they could not cover an unexpected $400 expense. But no one explained why. New research has some answers.

Even when people have $400 in their checking or savings accounts, they don’t always feel like they have the money to spend. That’s because they may have already committed the funds to paying off their credit cards, according to an analysis by Anqi Chen at the Center for Retirement Research.

This problem isn’t confined to low- and middle-income people either: 17 percent of households earning more than $100,000 would have to scramble to find the extra $400.

The study uncovered what cash-strapped families have in common. …Learn More

How Does Your Wealth Compare?

Depressing or eye-opening?

An online tool tells you where you stand financially by stacking up your net worth against other Americans.

The calculator compares a family’s net worth – financial and other assets minus debts – with all other U.S. families. Homeowners can choose to include the value of their home equity in their total net worth – or not.

Older people have had more time to accumulate wealth, so the rankings are based on the age of the household’s primary wage earner. The comparison is made with 2016 data from the Federal Reserve Board’s triennial Survey of Consumer Finances, which is the gold standard for personal financial data.

Since family – not individual – data are being compared, people who live alone are at a disadvantage. They will be measured against households with more than one person working and accumulating assets.

The calculator is on the DQYDJ financial blog written by a computer programmer and a financial professional. The validity of the results was confirmed by an economist formerly with the Center for Retirement Research, which sponsors this blog.

It might be fun to find out how you’re doing. But use this online tool at your own risk! …Learn More

Women’s Wealth Gap Exceeds Pay Gap

If the difference in men and women’s pay is a gap, then the wealth difference can only be described as a chasm.

Women earn 80 cents for each dollar a man earns. But a woman has 32 cents of net worth to a man’s dollar.

One byproduct of the #MeToo movement is the fresh light it has put on the age-old women’s issues of unequal professional status and pay.  But Elena Chavez Quezada, senior director of the San Francisco Foundation, explains in this video that wealth – home equity and financial assets minus debts – provides a more accurate picture of financial stability over the long-term.

A 2018 report found that net worth for older women, adjusted for inflation, has actually declined over the past two decades.

“If we are going to build women’s economic security, we have to talk about income and wealth inequality,” said Quezada, whose foundation promotes economic security for women and minorities.

Of course, wealth can’t be separated from pay. Women are able to save less, because they earn less and are more likely to have part-time jobs. A smaller share of them have a retirement plan at work than men, and the typical female worker saves 6 percent of her pay, compared with 10 percent for men, according to the Transamerica Center for Retirement Studies.

Although single women have slightly higher rates of homeownership than single men, if a woman can’t afford as large a down payment as a man, she starts out with less home equity.

Older women of color saw the largest decline in their net worth, according to the 2018 report, which was conducted by the University of Pennsylvania’s School of Social Work and the non-profit Asset Funders Network. …Learn More