Many American Senior Citizens Die With Little or Nothing

About 46 percent of senior citizens in the United States have less than $10,000 in financial assets when they die. Most of them rely on Social Security payments as their means of support. That is why Americans worry about not having enough money to live on in old age. Many of America’s old people have few savings in bank accounts, stocks and bonds, and die with almost no financial assets. It means seniors have can hardly withstand financial shocks, such as expensive medical treatments that may not be covered by Medicare or Medicaid, or other unexpected, costly events. James Poterba, the Mitsui Professor of Economics at MIT who studied the wealth of elderly Americans, said:

There are substantial groups that have basically no financial cushion as they are reaching their latest years.

The study, which also involved Steven Venti of Dartmouth College, and David A Wise of Harvard University, was among the few that have examined the economics of aging in the US, revealed a diversity of outcomes among senior citizens, and that the single elderly fared worse than married couples. While attention has been paid to how much wealth people needed to accumulate by the time of their retirement, this study focused on how that wealth panned out during retirement—right up to death.

Between 1993 and 2008, unmarried older people a year before they died had median wealth of about $165,000, including current and future Social Security income, job-related pension benefits, home equity and financial assets. In the same period, the median wealth for continuously married senior citizens, roughly a year before they died, was more than $600,000. Poterba says:

If we were to substantially reduce Social Security benefits for those later in life, there is a share of the elderly households for whom that would translate very directly into reduced income, because they seem to have accumulated little in the way of financial resources.

The work used data collected in the Health and Retirement Study (HRS), a continuing survey of people through their retirement, sponsored by the National Institutes of Health and based at the University of Michigan.

Poterba, Venti and Wise studied people who were older than 70 in 1993 when the HRS began, until the end of 2008. People were surveyed every two years, which averaged out to a year before the deaths of all those who died in the study period. Three main paths are possible in the years before death with different financial outcomes:

1. those consisting of one person who remained single until death
2. married people who outlive their spouses and die single
3. married people who die before their spouses.

Married couples are better able to mitigate the financial burdens of old age. Among retirees in the study, 52 percent who were single had annual incomes of less than $20,000 and less than $10,000 in other financial assets. In contrast, just 36 percent of single people who started out in two person households at retirement fell below those levels, and only 26 percent of people in two person households fit that description.

The study found a strong correspondence between wealth in 1993 and the length of time that people lived. That relationship held true across a variety of asset classes. People whose homes were worth more, who had larger retirement incomes, and who had more financial savings all tended to live longer than those who had fewer assets. Poterba observes that patterns of health status in these years are quite persistent. Better off senior citizens are healthier and live longer.

The paper has been praised by other researchers. David Laibson, an economist at Harvard, calls it “a terrific paper, which should have a significant impact on our national conversation about savings adequacy”. Laibson suggests that the replacement of “fixed benefit” retirement plans with plans subject to market fluctuations means that the financial situation for some seniors “is likely to get even worse in the years ahead. … For many reasons, especially pre-retirement leakage and poor stock market returns, households are accumulating far too little wealth in their 401(k) plans”, though many who end up in the bottom in tier of income, when they are very old, are folks who were probably not covered by defined-benefit plans during their working lives in any event.

Managers Make Staff Work Harder with Less Reward

Unless you are a banker, one might add!

King’s College London and law firm Speechly Bircham have surveyed 550 senior personnel of firms, with a combined workforce size of more than two million, to discover the state of human resources in the UK. It highlights the problems faced by employers, as they struggle to find ways to address gender pay inequality. They are unprepared for forthcoming changes to the retirement age, and are facing greater workplace unrest as austerity measures, longer working hours, stress and a skills shortage take their toll on the workforce. Richard Martin, Partner and Head of Employment at Speechly Bircham, said:

This sends a clear warning to employers. The combination of increased workplace conflict, longer hours and rising stress levels is a potent cocktail that could lead to a significant rise in tribunals and industrial action, if not properly addressed.

Despite our last survey showing that UK employers regarded employee engagement as their number one priority, reported levels of employee engagement have fallen. Skills shortages are worsening and the rigid cap on immigration means that employers are left with few tools with which to plug the skills gap. Only a small percentage of businesses have any measures in place to deal with pay inequality despite the Equality Act looming.

Perhaps most worrying is what can be read between the lines of the survey about employee wellbeing and engagement. At a time when employers should be focusing on re-engaging with staff and repairing the damage caused by the recession, staff are instead being made to work ever harder, without reward. An economic recovery built on working reduced workforces harder and harder is clearly not sustainable and could lead to major problems for employers—particularly in the public sector.

The gist of the report is:

• More than 50 per cent of firms reported an increase in working hours, while pay rises and bonuses are being withheld. Longer working hours correlated with increased absence, sickness, stress-related problems, and more grievances. Increasing working hours causes workplace unrest and higher staff turnover.
  
• 42 per cent of respondents employing non-EU workers reported that the immigration cap is affecting their business adversely. One in three businesses have an bigger skills shortage compared to last year when it was 22 per cent. Where there are skills shortages, staff turnover is increasing and more working days are being lost through sickness and absence.
• Deteriorating employee relations, high stress levels and workforce disputes appear endemic, particularly in relation to bullying, harassment and relationships with line managers.
• 46 per cent of respondents said that stress-related problems have gone up, while 30 per cent had seen grievances increase over the past year. Organisations that noted higher levels of stress showed a direct correlation with higher levels of sickness absence.
• In 2011, 40 per cent of respondents expect worse employee relations, 42 per cent expect higher stress levels and 29 per cent see rises in employee grievances.
• Most firms say they have equality of pay but admit they do not have any ways to check it. 84 per cent claimed no material gender pay inequality, but only a third had any means to monitor gender equality of pay.
• Most businesses are unprepared for the scrapping by law of the compulsory retirement age from April 2011. 78 per cent of respondents still had a retirement age of 65, and another 5 per cent had some other compulsory retirement age. Only a third of organisations thought it was an issue.
• Downsizing of workforces remains largely unchanged and flexible working continues to increase. 70 per cent were still having to make compulsory redundancies in 2010, hardly any improvement on the 72 per cent who downsized in 2009. Flexible working continues to be a popular workforce strategy in difficult conditions, with 36 per cent of respondents identifying an increase in the use of these arrangements.
• Macho management remains the fashion, even though poor relations with staff are the biggest source of grievance, formal grievances arising from employee relations with senior/line managers for 40 per cent of firms.
• Though job design, employee participation and procedural fairness have more impact on employment than supposedly more effective leadership and management, macho management continues to retain its appeal among management.

Stuart Woollard, Managing Director of King’s HRM Learning Board and co-author of the survey report, says the survey…

…should worry all business leaders and HR directors as the results question the sustainability of current strategies to keep workforces performing at the required level. Organisations must carefully consider the likelihood of erosion in employee productivity, work quality and performance as a consequence of lean workforces and additional working hours. With an apparent leadership/management disconnect with staff, firms may also not realise the nature and extent of the problems ahead.

Organisations that are able to understand and alleviate employee anxieties and provide effective ways to counter the impact of high pressure work environments will ensure that they retain more engaged and productive workers, making a route through the economic uncertainties far clearer. There is evidence in our survey that those firms who are able to implement effective HR strategies that drive higher levels of engagement may find that these initiatives will differentiate them in terms of organisational performance.

Anyone looking on with a critical eye cannot fail to wonder why bankers need huge bonuses to motivate them to work, but people doing something useful, making things we need in a factory, or distributing them, whether laborers or skilled technicians, need to be threatened and bullied according to the continuing fashion for macho management. The macho managers haven’t the wit to realize that cutting and cutting staff levels, and forcing people to do more for less, while refusing to train the staff in the skills they, and we, need is destroying our potential for surviving. Moreover, the more people have to work and the less they have to spend and the less leisure time in which to spend it, the less will be bought. It forces us into depression. In short, our governments and the management they represent could hardly do worse.