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The stock market lost 47 percent of its value between September 30, 2007 and December 2, 2008, a roughly $11 trillion drop. The loss has reduced the retirement savings of many Americans, particularly older adults. This fact sheet examines the impact of the ongoing economic turmoil on older households and presents estimates of the retirement account losses to date.
How Is the Financial Crisis Affecting Retirement Savings?
The stock market lost 47 percent of its value between September 30, 2007, and December 2, 2008, a
decline of about $11 trillion. These losses have reduced the retirement savings of older Americans.
How Much Have Retirement Accounts Fallen?
- Assets in retirement accounts (defined contribution plans and IRAs) reached $8.7 trillion on
September 30, 2007. About 70 percent of these assets were invested in stocks. As of December 2,
2008, retirement accounts have lost $2.8 trillion, 32 percent of their value (figure 1).
How Is the Financial Turmoil Affecting Older Americans?
- Older households typically hold less in stocks and are thus less exposed to market fluctuations
than their younger counterparts. Nonetheless, equities account for about half of the assets in the
typical account of households age 50 and older. Additionally, a loss disrupts retirement plans
more for households nearing retirement than for those with many years before retirement, because
older households have less time to recover.
- The plummeting value of retirement assets could force older adults to delay retirement and
remain at work and could encourage some retirees to return to work. However, contracting credit
markets could weaken the labor market, limiting employment opportunities for older adults
(Johnson, Soto, and Zedlewski 2008).
(The fact sheet is available in PDF format.)
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