Brief #8 from the series Older Americans' Economic Security
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As people prepare for retirement, even the best-laid plans can go awry. Health fails. Spouses or other family members become ill. Marriages end in widowhood or divorce. Investments sour. People lose their jobs. Health, employment, and marital shocks can have serious financial consequences—out-of-pocket health bills, reduced earnings, disrupted retirement saving—forcing people as young as 50 or 60 to dip into their nest eggs.
Health Problems, Job Loss Can Strike Before Retirement
About 7 in 10 adults who were age 51 to 61 in 1992 developed health problems, lost spouses to death or divorce, or became unemployed during the 10-year period ending in 2002. More than 4 in 10 were diagnosed with major new medical conditions, including heart problems, cancer, serious lung problems, diabetes, strokes, and psychiatric problems. About one-third developed work disabilities through health problems that curtailed employment. Nearly one-fifth were laid off between 1992 and 2002. About 10 percent of married adults became widowed; another 3 percent divorced. These estimates are based on data from the Health and Retirement Study (HRS), a large nationally representative survey of older Americans funded by the National Institute on Aging.
Negative shocks at older ages are especially common among people with limited education, who generally have fewer financial resources to help them weather adversity. For example, at ages 51 to 61, about half of those without high school degrees developed new medical conditions over a 10-year period, compared with only about one-third of college graduates. High school dropouts are also more than twice as likely to become widowed as college graduates, and nearly four times as likely to become seriously disabled.
Married people are less likely to develop health problems than single people. Yet, they face the added risk of divorce and the risk that their spouses could die, become ill, or lose their jobs. When things go wrong for spouses, the financial consequences can be just as serious as when one's own health fails or other misfortune strikes. With spousal health problems and job loss factored in, the share of married people age 51 to 61 experiencing negative events over a 10-year period jumps to 87 percent, compared with 69 percent for single people.
Note: This report is available in its entirety in the Portable Document Format (PDF).
This brief was adapted from When The Nest Egg Cracks: Financial Consequences of Health Problems, Marital Status Changes, and Job Layoffs at Older Ages
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