Some older Americans may not be entering their golden years with gold, or any form of wealth for that matter, according to a new study.
Approximately four in 10 people over the age of 60 will experience poverty at some point, according to a study released at the end of May from the AARP. The study also said that Social Security accounts for 40% of retirement income and without it, poverty numbers would increase to nearly 50% among those over 65.
With possibly losing a spouse, having assets eroded by inflation, and increasing health-care costs (especially long-term care) combined with longer life expectancies, its no wonder that retirement savings disappear quickly, according to John Rother, director of legislation and public policy at the AARP.
As a result, not only are more people are working past the age of 65, they are also using other alternatives to save for retirement. The AARPs study said that Social Security is the only source of income for 17% of people 65 and over, while earned income accounts for another 20% of retirement income.
"Its been preached so long that Social Security probably wont support you that lots of people take a deep breath and say, Okay, Ill take care of it myself,'" said David Lewis, president of Resource Advisory Services in Knoxville, Tenn.
But the study reported another alarming statistic. Despite consumers opting for other retirement income sources, approximately 60% of 401(k) participants who change jobs take cash payments rather than rolling their assets over into an IRA or another employers plan.
Planners said that employees may not stay at a their jobs long enough to acquire large balances, opting to take the cash. Yet some retirees still dont choose to roll assets into another vehicle.
"People look upon balances as a paycheck they never got," said Charles Hughes, a planner in Bay Shore, N.Y. "There is still a great deal of education to be provided because the employees now have access to a great deal of money and dont know what to do with it."
Is lack of education the advisers fault? Some think so.
"Too many financial advisers [ask] the question of when can you afford to retire, not how to keep yourself financially stable, for what is increasingly, a longer retirement," Rother said.
Others, however, said the statistics reinforce the notion that even people who are already retired still need financial planning. "Its a wonderful opportunity for financial advisers," Hughes said.
The study also reported that women make up 65% of the bottom income quarter of the surveys participants and are less likely to have pensions. Only 26% of the female participants had a pension, compared to 44% of the male participants.