AmQuix Urban Legend Exposed

One of the most famous Amway Urban Legends passed along by Amway Quixtar distributors is the quote that "according to the American Bankers Association., 95% of all people who reach retirement age or either dead or broke". 

audio.gif (922 bytes) Cown IBO Ron Puryear - 98% of all people are dead or broke by age 65

On a Quixtar bulletin board there was a small debate about this topic with a link to the Social Security web site. After downloading the 12 meg .pdf and going to page 22 the historic quote had finally been found!   (page in .html)(easier to download)

The document was actually minutes to the Senate Finance committee from January 30, 1935, before the Social Security Act was passed in August of 1935.   In the minutes an excerpt from the "Diamond Life Bulletin of 1934" quotes a study of 20,000 men by the American Banker's Association.

Needless to say, much has changed with retirement income since 1935.   Not only was Social Security enacted, which of course is a financial time bomb for those born after 1960, but since 1935 most corporations have implemented pension plans for employees, and people have access to 401K savings plans, IRAs, Roth IRAs, and tax advantaged annuities. Also noted in the report was that there was very low property ownership, which is not the case today. 

It is amazing, yet not surprising, that Amway Quixtar distributors continue to repeat the same old scare tactic lines from an 80+ year old study to attract participants to their scheme.  When the basic financial infrastructure for retirees has changed so dramatically, it is simply amazing they cling to the outdated data of this urban legend.  The 20,000 people used in the study were all born before the American civil war!

Data from the IRS suggest that this common myth of Amway and Quixtar distributors is very untrue 80+ years later.  The data show that 50% of all retires have incomes greater than $20,000, and 20% have incomes greater than $40,000. About 5% had incomes over $100,000/per year.  If any income under $100,000/year classifies you as "broke", then the distributors' claims are true.

It is rather ironic that IBOs propose the solution to the retirement income problem be that people participate in yet another pyramid scheme (Quixtar) since the grand daddy of them all Social Security doesn't seem to meet their likings!

Here is the actual text from the 1935 Senate Finance committee hearing:

[Reprinted from The Diamond Life Bulletin Service (1934 monthly bulletins) published by the National Life Underwriters, 420 East Fourth Street, Cincinnati, Ohio]

Now, let's look at the situation of 100 average men according to the figures given by the American Bankers Association approving a special investigation of 20,000 old men, made by Joseph J. Devney, of Cleveland." According to these figures, at age 65, 42 out of 100 men starting at age 25 have died, leaving 58 surviving. Of these 58, 8 are independent (or 14 percent of those surviving); 28 (or 48 percent) have no money but can work; 22 (or 38 per- cent) have no money and can't work. Now let's look at the figures at age 75. By this time 67 have died out of the original 100. Only 3 of the remaining 33 have money (which is 9 percent); 14 (or 42 percent) have no money but can still work; 16 (or 49 percent) have no money and can't work. Notice particularly that several who had money at age 65 evidently did not have it invested in an old man's investment, because the money didn't last, Let me repeat these figures. They ought to make us all think.

At age 65 half of our hundred young men are still living and have no more money than they had when they started out 40 years before. They have no property at all, or not enough to support them without a job. Where do you suppose the money went? Of course, we don't know. But there's the picture: 50 out of 58 men left out of the original 100 are "broke" at 65.

Then look at age 75. Only 3 have money, and 30 have nothing at all to live on. The rest are dead. Think of what this means. Even if we do have money here at age 35, and even if we think we're "sitting pretty"-we can't get away from these figures.

This is life and these facts apply to every one of us, because if we live to be 60 or 65 we may be "broke" too, just like so many others. Even though we do make money in the meantime, we may lose out some place in between. There has certainly been enough experience with losses in the ordinary forms of property during the last 2 or 3 years to make us all "sit up and take notice." The number of men out of 1,000 alive at each 10-year age period who are worth $100 or more increases until age 45 is reached, then it declines rapidly. At 75 fewer men have at least $100 than at 25-notwithstanding they have had 50 years in which to accumulate. Those who have $1,000 or more increase until 45, remain the same until 5.5, then decrease.  

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