A new study reporting data from the Health and Retirement Study shows that a serious financial loss in midlife or later can increase the risk of death in both men and women by as much as 50% going forward. The 8,714 participants in the study, which began in 1990 and followed a nationally representative cohort of American adults 51 years of age or older, were interviewed every two years. They answered questions about their health and financial status, including the value of assets such as homes, businesses, and bank accounts and liabilities such as mortgages, consumer debt, and medical debt. In a press release about the study, senior author Carlos Mendes de Leon, PhD, from the University of Michigan stated that the results “offer new evidence for a potentially important social determinant of health that so far has not been recognized: sudden loss of wealth in late middle or older age.”
Serious financial loss in midlife or later can increase the risk of death in both men and women by as much as 50% going forward.”
In this analysis, the study authors divided participants into 3 groups: those who experienced a “negative wealth shock” during follow-up, which they defined as a loss of at least 75% of net household worth over two years; people with continuous positive wealth, who experienced no serious loss of assets; and people with “asset poverty,” defined as no or negative net worth at entry into the study. Compared to those who do not suffer a serious financial setback after age 51, those who do experience serious financial loss have an increased risk of death over the next 20 years by as much as 50%. Wealth shocks that occur later in life are particularly devastating because the individual has less time and opportunity to recover.
And, these events are more common than we might like to think: over 25% of of participants experienced a loss of 75% or more of household wealth during the study period. Having wealth and losing it is almost as bad for a person’s life expectancy as never having had it at all.
The data analysis focused on mortality from all causes between 1994 and 2014 as the single outcome of interest. The analysis was adjusted for numerous covariates including race, educational status, household net worth, and health behaviors such as smoking, alcohol consumption, and physical activity, to remove the statistical influence of these variables on the outcome.
Participants were 53% women and 47% men, with an average age of 55 years, who were followed for an average of 17.7 years. Of those 8,714 people, 2,430 experienced at least one negative wealth shock, and another 749 had asset poverty at baseline. “Accounting for the complex survey design of the [study], this amounted to 26.2% experiencing a negative wealth shock and 6.9% having long-term asset poverty of the US population aged 51 years or older during the study period,” said the authors.
Overall, 2,823 participants died during the follow-up period, which used person-years as a standardized measure to make the outcome comparable across all three groups. Among those in the continuous wealth group, the mortality rate was 30.6 deaths per 1000 person-years, while rates for those in the wealth shock and asset poverty groups, were 64.9 and 73.4 deaths, respectively. Notably, mortality rates were highest for those without any assets to lose. The findings were published in the April 3 issue of JAMA, the Journal of the American Medical Association.
The authors note that their findings add to the research literature documenting the association between negative wealth shocks and adverse short-term health outcomes such as depression, suicide, anxiety, substance abuse, and impaired cardiac function, as well as causes of death that take longer to develop. The psychosocial toll of financial loss may make people more vulnerable to stress-related illnesses such as cardiovascular disease, or to mental disorders and substance abuse, which are all associated with a higher risk for mortality. Additionally, people may delay necessary medical care or avoid filling prescriptions. Interestingly, wealth shocks related to the loss of a home showed a stronger association with mortality than wealth shocks without such loss, although both were associated with increased risk.
The study does have several limitations that offer intriguing topics for future research. What is the relationship between mortality and smaller wealth shocks over a longer period of time? What were the range of causes of the participants’ wealth shocks? The study was also unable to control for all possible confounding factors, and cannot be generalized to people who experienced a wealth shock earlier in life.
Having wealth and losing it is almost as bad for a person’s life expectancy as never having had it at all.
What are the implications of this study for advisors? Just as healthcare providers need to be aware of their patients’ financial status, financial professionals may want to recommend that their clients who experience a negative wealth shock get preventive medical care, including counseling to cope with any psychosocial issues. For clients who are interested, advisors may also have referrals available, as well as information about low-cost options in their community to help them manage their increased health risk. This may be particularly important for those who have experienced the loss of their home.