Headline from yesterday's Wall Street Journal: "Household Wealth Rises as Retirees Age."Don't believe it? You're right. The Federal Reserve studied a group of householders over 70. From 1998 to 2004, the group's median wealth dropped over 20%.
But that's not what the study was actually about.
Imagine someone age 75 buying a life annuity for $100,000. Now imagine someone age 95 buying a life annuity for $80,000. Which one will receive the higher annual payout?
The 95-year-old. The older annuitant's much shorter life expectancy more than offsets the lesser amount of available wealth.
To put it another way, as the Fed study does, the older annuitant possesses greater "annualized wealth."
The study is discussed on the WSJ economics blog here. You can read the Fed study here.
Retirees aren't getting richer. But most of those studied appeared to be on course to run out before their wealth does.
Will Boomers be as fortunate?
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