What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population

TitleWhat the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population
Publication TypeJournal Article
Year of Publication2010
AuthorsGustman, AL, Steinmeier, TL, Tabatabai, N
JournalJournal of Economic Perspectives
Volume24
Issue1
Pagination161-82
KeywordsConsumption and Savings, Employment and Labor Force, Event History/Life Cycle, Net Worth and Assets, Other, Retirement Planning and Satisfaction
Abstract

This paper investigates the effect of the current recession on the retirement age population. Data from the Health and Retirement Study suggest that those approaching retirement age (early boomers ages 53 to 58 in 2006) have only 15.2 percent of their wealth in stocks, held directly or in defined contribution plans or IRAs. Their vulnerability to a stock market decline is limited by the high value of their Social Security wealth, which represents over a quarter of the total household wealth of the early boomers. In addition, their defined contribution plans remain immature, so their defined benefit plans represent sixty five percent of their pension wealth. Simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1.5 months on average. Health and Retirement Study data also show that those approaching retirement are not likely to be greatly or immediately affected by the decline in housing prices. We end with a discussion of important difficulties facing those who would use labor market policies to increase the employment of older workers.

Notes

Journal Article

URLURL:http://www.aeaweb.org/jep/ Publisher's URL
DOI10.1257/jep.24.1.161
Endnote Keywords

Personal Finance/Information and Market Efficiency/Event Studies/Retirement Policies/Older Workers/Retirement/Stock Market

Endnote ID

22160

Citation Key7449