Mind & Matter: The Deadly Risk of Losing your Financial Nest Egg -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 12, 2018).

Is it worse to suddenly lose your financial nest egg or never to have saved any money at all? This question concerns many of us: A quarter of Americans watched much or all of their life savings evaporate during the last recession, while nearly half of U.S. families have nothing put aside for retirement, according to the Economic Policy Institute and federal data.

Either way, there's no happy answer. Both scenarios can increase our risk of dying within the next 20 years by more than 50%, a recent study shows.

We've long known that a financial shock causes immediate distress. Suit-clad men leaping from buildings were dismal hallmarks of the Great Depression, and soon after a major recession began in 2007, there were notable spikes in clinical depression, substance abuse and suicides.

But what about the effects of such a shock over a more extended period? "Does the stress of losing one's wealth also create a long-term risk?" asked Lindsay Pool, a Northwestern University epidemiologist and the lead author of the new study. Published last month in the Journal of the American Medical Association, her research investigated how losing one's life savings in the short term might curtail one's lifespan in the long term.

To find out, the researchers analyzed how participants in the federally funded Health and Retirement Study fared over a 20-year period. When the study began, researchers selected a nationally representative group of people in their 50s and asked these roughly 8,700 men and women detailed questions about their daily habits, health and financial situation.

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.

The results showed how profoundly financial loss can damage us. Exactly how this happens at the physiological level is still being worked out, but we already know that stress unleashes hormones that constrict our blood vessels and make our hearts beat faster -- thus increasing blood pressure and possibly spurring a future cardiovascular event. Coping with ongoing pressures we cannot control has also been linked to a shorter lifespan.

Loss of control was front and center for the 26% of those in the survey who had endured a wealth shock. They were 50% more likely to have died during the period of the study, compared with participants whose savings remained intact. The researchers statistically controlled for other causes of mortality, such as ill health, job loss, insurance loss and marital breakdown.

Interestingly, women were more likely to have experienced a wealth shock than men, but they were not more likely to die as a result. They were, in short, more financially vulnerable but more resilient physiologically.

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.