NPR - U.S. Survey: Millions Forced To Rethink Retirement

[sharon sanders]

Survey: Millions Forced To Rethink Retirement

by Marilyn Geewax
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<!-- END INSET COLUMN --><!-- START STORY CONTENT -->Weekend Edition Sunday, June 28, 2009 ? With the recession squeezing wages and holding back stock prices, millions of Americans are being forced to rethink their plans for retirement, according to a new survey.
Watson Wyatt Worldwide Inc., a retirement consulting firm, has released a survey showing that in the past year, 44 percent of workers age 50 or older have had to delay their planned retirement date. Three-quarters of those now planning to postpone retirement cite the loss of savings in their 401(k) accounts as the single biggest reason, the survey showed. The respondents also said they need to work longer because of rising health-care costs and fears about price inflation.


If Americans do keep working longer, it would reverse a decades-long trend towards earlier retirement. The U.S. Bureau of Labor Statistics says the average age for men at retirement in the early 1950s was just under 67. That age fell continually until it hit 62 in the late 1990s.


The survey of 2,200 full-time workers suggests the recession, stock market crash and drop in home values could dramatically reverse the earl retirement trend. Half of workers over age 50 now say they plan to retire at age 66 or later.


"The economic crisis has affected many workers' retirement plans and nest eggs, but those nearest to retirement have been especially hard hit," David Speier, senior retirement consultant at Watson Wyatt, said in a written analysis of the data. "Older workers do not have the time to offset declining retirement account values, either by recouping their investment losses or significantly increasing their savings rate. For many, the only choice is to delay retirement."


A Federal Reserve survey in 2007 found that the median household in the pre-retirement age group ? ages 55 to 64 ? had total financial assets of more than $72,000. Based on the stock market's performance over the last two years, those savings would have been whittled down to $55,000.
Such losses appear to be spurring more Americans to save. On Friday, the Commerce Department said the savings rate spiked to 6.9 percent in May, up from 5.6 percent the previous month. That's the highest savings level in 15 years.

http://www.npr.org/templates/story/story.php?storyId=106012406&ft=1&f=1001

 

[german-docter]

Re: NPR - U.S. Survey: Millions Forced To Rethink Retirement

INTERNATIONAL MONETARY FUND
The State of Public Finances:
Outlook and Medium-Term Policies After the 2008 Crisis
Prepared by the Fiscal Affairs Department
In cooperation with other departments
Approved by Carlo Cottarelli
March 6, 2009

Quote: pages 17-18:

IV. FISCAL IMPLICATIONS OF THE FINANCIAL CRISIS:
EFFECTS THROUGH THE FUNDED COMPONENT OF THE PENSION SYSTEM

Prepared by Robert Gillingham, Adam Leive, and Anita Tuladhar.

24. A key fiscal risk presented by the crisis is its effect on funded components of the pension system, both public and private. The level of funding for pensions has increased rapidly in recent years as a share of GDP, reflecting both earnings on existing retirement saving and net deposits. Some of the countries most affected by the recent stock market decline are those where private pensions play an important role in mandatory pension provision. It is useful to assess at the outset the overall loss suffered by funded pension schemes.

[graph 1 see attachment]

A. Losses of Funded Pension Schemes

25. Public and private pension fund losses are concentrated in a limited number of countries. These are countries that, with more mature funded pension schemes, have higher shares of equities and mutual funds in pension fund portfolios and higher shares of pension saving in relation to GDP (Mutual funds in these countries are also heavily weighted toward equities. Investment by funded pension funds in real estate is small (below 3 percent of total assets, on average, for OECD countries) : 16 of the 46 countries for which data are available have pension fund investments in equities and mutual funds greater than 10 percent of GDP (striped circles in Figure 2). Countries more exposed include Australia, the U.S., Canada, Iceland, the Netherlands, Switzerland, Denmark, and the U.K.. Among emerging economies,South Africa, Chile, and Brazil are more exposed. Estimated losses in the U.S. and the U.K. during 2008 are, respectively, 22 percent and 31 percent of GDP.

[graph 2 see attachment]

Note: Size of circles represents pension funds? equity and mutual fund assets as a percent of GDP. Circles with stripes denote countries where this value exceeds 10 percent of GDP. Data do not include reserve funds of social security systems or funds whose assets may be used for purposes other than financing the social security system, such as in Norway.​

26. A separate risk is pension fund exposure to potentially ?toxic? assets, such as mortgage-backed securities and credit default swaps. The OECD has estimated average holdings of 3 percent of such assets in the portfolios of pension funds that member countries have (OECD, 2008). Structured products?the class of assets within which toxic assets fall?represent about 8 percent of pension fund assets worldwide. The risk is concentrated in the U.S., Sweden, and Japan.

http://www.imf.org/external/np/pp/eng/2009/030609.pdf