How Is the Financial Crisis Affecting Retirement Savings?

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Abstract

The stock market gained 35 percent between March 9, 2009 and May 5, 2009. For those who held on to their equities, these gains reversed some of the massive losses experienced since September 2007. This fact sheet examines the impact of the ongoing economic turmoil on older households and presents estimates of the retirement account losses to date.

ABOUT THIS REPORT

The stock market gained 35 percent between March 9, 2009 and May 5, 2009. For those who held on to their equities, these gains reversed some of the massive losses experienced since September 2007. How Much Have Retirement Accounts Fallen?

• Updated estimates from the Board of Governors of the Federal Reserve indicate that assets in retirement accounts (defined contribution plans and IRAs) reached $8.8 trillion on September 30, 2007. About 70 percent of these assets were invested in stocks. We estimate that, as of May 5, 2009, retirement accounts held about $6.1 trillion in assets – a loss of $2.7 trillion (31 percent) since September 2007 (figure 1).
• Retirement accounts, however, are well off their lows. These accounts gained approximately $1 trillion between March 9, 2009 and May 5, 2009 (figure 1). How Is the Financial Turmoil Affecting Older Americans?
• Older households are not isolated from market swings. Before the financial crisis, households age 50 and older typically held half their retirement assets in equities. Although stock losses likely reduced equity exposure, part of their retirement security remains at the mercy of the market.
• Losses in retirement assets could force older adults to remain in the labor force. But the slowing economy could limit their employment prospects. In fact, the unemployment rate for older adults recently reached the highest level recorded since 1948 (Johnson and Mommaerts 2009).

Reference
Johnson, Richard W. and Corina Mommaerts. 2009. “Unemployment Rate Hits All-Time High for Adults
Age 65 and Older.” Washington, DC: The Urban Institute.
This fact sheet was supported by the Rockefeller Foundation. The views expressed

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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