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Wealth Shock! “All of a Sudden Their Wealth is Gone”

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You simply cannot afford to take heavy losses in or near retirement. From a financial standpoint the arithmetic of losses is devastating—lose half your portfolio and you need a 100% gain (not likely) to get back to even.

Now, a study has been done to show the impact of losing money on one’s health. And it’s not good.

“Published last month in the Journal of the American Medical Association, [Lindsay Pool of Northwestern University] investigated how losing one’s life savings in the short term might curtail one’s lifespan in the long term,” writes the WSJ’s Susan Pinker.

Every two years, from 1994 until 2014, the federal study’s investigators called each subject looking for any change in their status and especially for a signal event: the disappearance of 75% or more of a person’s assets during the previous two years. “The reason we look at 75% or more is that we’re looking for a sudden loss, one that’s high enough to be shocking. People are nearing retirement, and all of a sudden their wealth is gone,” said Dr. Pool.

Over the 20-year period, one in four participants endured a wealth shock—losing 75% or more of their savings. They were twice as likely to have died during the study compared to those whose savings remained intact, explains Pinker. Men were more likely to have died as a result. But women were more likely to have experienced a wealth shock. Their survival rate, however, was much higher.

The study can’t explain why losing your life savings can kill you, only that it does. But one of the researchers’ findings is clear: At 50%, the mortality risk of those who had lost their nest eggs was lower than for those who never accumulated much for retirement at all; those people were 67% more likely to die than savers. It may be cold comfort, but it seems that it’s better to have saved and lost than never to have saved at all.

My takeaway? Avoid the big time losses at all costs. It’s OK to lose money, temporarily. If you don’t sell, you don’t lose. In fact you accumulate more shares at lower prices. And having all of your money tied to the stock market is no way to invest in, or during, retirement. You want to deploy a counterbalanced approach that will allow you to have the guts to stay invested when times are tough.

Originally posted on Yoursurvivalguy.com. 

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.