JAMA article on Net Worth Shock and Mortality

[Dr. Mom]

Interesting read about net worth shock in 51-61 year olds and increased mortality.  I would have expected it.  What I found most shocking/interesting was that 26.2% of respondants experienced a net worth shock which was defined as loss of 75% of asset value over a 2 year span.  I also found it interesting that net worth shock with house loss was different than without house loss.  It reinforced our plan about going ahead with paying off home before retirement.  I have also found it hard to become less aggressive in our asset allocation as we approach our sequence of return years.  The article reinforces for me our need to do so.

https://jamanetwork.com/journals/jama/fullarticle/2677445

 

[startupdoc]

Very interesting. Highlights the importance of being really in-tune with your personal risk tolerance and adjusting it as time goes on.

[bean1970]

The net worth values are worth noting. the median net worth was 223K. for some of us that is only a couple months expenses........

[The White Coat Investor]

Correlation is not causation. Is the financial shock due to the illness/injury/mortality or vice versa?

I also like the phrase "asset poverty" as if that's somehow different from regular poverty. If you have a negative net worth, you're poor, I don't care if you're a trauma surgeon making $500K a year.

[bean1970]

Or less than a tax bill or surely less than a home for many here.... most Americans have squat in savings. So any hit is a big hit.....

[ENT Doc]

bean1970 wrote:

The net worth values are worth noting. the median net worth was 223K. for some of us that is only a couple months expenses……..

Click to expand...

************************.  I need to party it up with these people.

[VagabondMD]

The White Coat Investor wrote:

Correlation is not causation. Is the financial shock due to the illness/injury/mortality or vice versa?

I also like the phrase “asset poverty” as if that’s somehow different from regular poverty. If you have a negative net worth, you’re poor, I don’t care if you’re a trauma surgeon making $500K a year.

Click to expand...

True dat. How often does one's earnings decline due to illness (diagnosed or subclinical) and diminished job performance or loss of job?

[Donnie]

The White Coat Investor wrote:

I also like the phrase “asset poverty” as if that’s somehow different from regular poverty. If you have a negative net worth, you’re poor, I don’t care if you’re a trauma surgeon making $500K a year.

Click to expand...

While I get the point you are making, this simply isn’t true.  A family making $50k per year with $50k of cc debt and no assets is poor.  A surgeon making $500k per year with $500k of student debt and no assets may not be rich, but he certainly isn’t poor under any standard definition of the word.

[Hatton]

When I first read Dr Moms post I thought the study was just docs.  I read the article and found out it was the general population.  This does support not being 100% stocks because in a bad market you really have to realize some people develop substance abuse or even commit suicide.  Stocks have away of correcting your asset allocation.

[bean1970]

ENT Doc wrote:

bean1970 wrote:

The net worth values are worth noting. the median net worth was 223K. for some of us that is only a couple months expenses……..

Click to expand…

************************.  I need to party it up with these people.

Click to expand...

ya. just pick those people out of the net worth survey.....

 

[ENT Doc]

hatton1 wrote:

When I first read Dr Moms post I thought the study was just docs.  I read the article and found out it was the general population.  This does support not being 100% stocks because in a bad market you really have to realize some people develop substance abuse or even commit suicide.  Stocks have away of correcting your asset allocation.

Click to expand...

This study showed that the people who were most risk-averse who suffered a shock were more likely to die than those who were less risk-averse.  This makes sense, right?  You'd expect the people who are more risk averse to be in something conservative, and a shock is more "shocking" to them than someone who accepts more variability.

[Complete_newbie]

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I'm not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn't mean correlation is worthless and not important. This IS an interesting study. Don't ignore it by just saying correlation is not causation as knee jerk statemwnt. That's lazy.

This study is AS CLOSE you'll get to proving causation (its a good longitudinal study). They have controlled for all the other stuff WCI is mentioning (which they mention in paper). They do come out and say "despite adjusting for conditions that frequently precipitate wealth shocks, including marital disruption, unemployment, and a variety of health status and access to care indicators, residual confounding is likely" <- not uncommon in majority of studies.

If we were to just do blind randomized trials to prove stuff, we'd still be brushing teeth with twigs.

[Complete_newbie]

Actually it is prospective study and they have controlled for covariates. This is statistically significant. Good study.

[beagler]

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand...

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be "acting poor" in relation to spending -- lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

"Acting rich" while having negative NW can do a lot of financial damage. I'd view negative NW as a near-emergency mode.

[Complete_newbie]

beagler wrote:

Complete_newbie wrote:

I am with Donnie. This whole NW is the clear cut marker of poverty is not correct. My NW is -600k+; I’m not poor.

Also I am assuming doctors read these forums, causation studies are few and far between. Majority of what you read in your X journal is retrospective stuff; doesn’t mean correlation is worthless and not important. This IS an interesting study. Don’t ignore it by just saying correlation is not causation as knee jerk statwmwnt. That’s lazy.

Click to expand…

With a negative NW, one is clearly not rich. I think negative NW doctors are poor, but with high potential to become rich. They should be “acting poor” in relation to spending — lest they never become rich despite the high income.

You can borrow against that potenial richness by spending more now, but that delays or prevents NW accumulation.

“Acting rich” while having negative NW can do a lot of financial damage. I’d view negative NW as a near-emergency mode.

Click to expand...

Unerstand what the general standard is but its not like this is a scientific gold standard.

Also my negative networth is a controlled one on purpose to boost income. I can wipe that out in 1 year if I want to - that makes me rich. I am not alone in this line of thinking despite being against the grain (see Zaphod et al). What does that make me? Poor? No.