While many Americans spend their through assets in old age, a surprising number have more savings two decades after retiring than they do when they leave their jobs.  The phenomenon is yet another chapter in the story of old age in the US– which might be titled A Tale Of Two Retirements.

A new study by Sudipto Benerjee of the Employee Benefit Research Institute  paints the picture: Over the first 18 years of retirement, about one-third of seniors in two large national studies increased their assets.  This was true even among those who began with relatively little wealth. Typical older adults who had less than $500,000 in financial assets at retirement spent about one-quarter of their nest eggs within the first two decades after getting the proverbial gold watch—a significant amount but less than many retirement models predict.

Hanging on to assets

Not surprisingly, Banerjee found that those who retired with non-housing assets in excess of $500,000 were more likely to increase their wealth in old age. And he found that those with old-style defined benefit pensions spent less of their wealth than those without them.

But a surprising number of seniors—even those with limited financial resources– held on to their financial assets, at least for the first couple of decades after retirement. They apparently did it by reducing their spending to match their income so they did not have to dip into savings.

Banerjee defined non-housing assets as stocks, bonds, mutual funds, savings accounts, CDs, housing except for a primary residence, and the value of automobiles. Wealth was net of debt. He excluded 401(k)s. Then, he divided retirees into three groups: Those with less than $200,000 just before retirement, those with $200,000-$500,000, and those with more than $500,000.

The surprising story

Median assets for the lowest income group dropped from about $32,000 at retirement to $24,000 after 18 years. That’s a decline of about one-quarter. But here is where the story gets really interesting: About one in five in this group had only 20 percent of their assets remaining after just four years of retirement. No surprise there.  But 35 percent had more savings after 18 years than when they started.

For those with a moderate amount of wealth, median assets fell from about $302,000 to $243,000 after 18 years—a decline of about 27 percent.  But here again the average is misleading. About 16 percent had only 20 percent of their assets left after two decades, while 37 percent had more than when they retired.

The very old and the very sick

The highest asset group started with an average of about $857,000 and still had about $756,000 after two decades. Among this group, about 12 percent was left with only 20 percent of their assets after 18 years while 35 percent saw their nest eggs grow after two decades.

Other research confirms Banerjee’s basic story. But a closer look at spending patterns in old age helps explain why some seniors in all wealth groups increase assets in old age while others spend all their savings and become impoverished: the need for high levels of medical and long-term care.

In a separate paper, Banerjee looks at the wide variation of health care costs (including nursing home expenses) for those aged 70 and older. The average out-of-pocket cost of care from age 70 to death is about $27,000. But costs for the top 10 percent is $172,000 and the top 5 percent is $269,000.

In this study, Banerjee is looking at a slightly different population (age 70 to death instead of the first two decades after retirement) and costs for the very old are higher than even those in their early 80s. But the basic message remains: While average out-of-pocket health care costs are manageable for even middle- income seniors, the relatively few with high medical costs easily can be ruined by the expense.

A 2015 paper by Jim Poterba,  Steven Venti, and  David Wise  for the National Bureau of Economic Research also looked at the changes in financial assets of those aged 70 and older. They found savings were typically very stable: Those who were poor before the retired tended to die poor. Those with substantial assets at age 70 died with significant amounts of wealth.

A more complex story

But there were two exceptions: Those who lived to a very old age (90 or older) spent more of their resources in their last years. And those who either divorced or suffered adverse health events, such as strokes, were more likely to run out of money.

It is common for progressives to focus on those  older adults who outlive their assets, while many conservatives point to data that show average savings and costs in old age and conclude there is no “retirement savings crisis.” This important research tells a more complicated story: While a surprising number of seniors hold on to their assets in the first years after retirement, some—especially those who have few assets to begin with,  live a long time in old age, or who suffer from serious illness—will indeed become impoverished.