baby boomers, the financial crisis, and the recession€¦ · boomers expect a working retirement...
TRANSCRIPT
Baby Boomers, the Financial Crisis, and the Recession
Sara E. Rix
Senior Strategic Policy Advisor, AARP Public Policy Institute
Stable Value Investment Association Spring Seminar
April 15, 2013
AARP Public Policy Institute Looks at Boomers and the Recession
• How did boomer workers fare during and shortly after the Great Recession?
• What were boomers’ experiences with unemployment and reemployment?
• What hardships did they suffer?
• How did they respond to financial difficulties?
• How do they see their retirement prospects?
• What is the role for public policy?
Study of Boomers and the Recession
• Boomers 50-64 who were in the labor force or who had been at some point since start of Great Recession
• National random sample of 3,950 men and women in 10/2010
• Subsample re-interviewed in 8/2011
• 59% steadily employed throughout recession and up to survey date
• 13% of employed had been involuntarily unemployed before finding a new job
• 17% unemployed
• Rest were out of the labor force
Recession Alters Boomers’ Retirement Plans and Expectations
• More than a doubling of unemployment rate during downturn and slow recovery
• Soaring duration of unemployment
• Reemployment often at lower wages/benefits
• Cut back on saving, including retirement saving
• Tapped into and often exhausted savings
• Delayed getting medical/dental care
• Not much time to recover
Recession Alters Retirement Plans--2
• Majority of boomers lack confidence that they will have adequate nest egg for retirement.
• Women are more concerned than men.
• Boomers are taking steps to prepare for secure retirement.
• Some may be willing to accept lower standard of living in retirement.
Income Sources of Older Households:Earnings and Social Security Dominate Percent Aged 55–61 and 65+ Receiving Income from Source
79%
13%
6% 7%
48%
21%
8%
26%
86%
15%
27%
49%
19%
9%
Earnings Soc. Security Other pub.pension
Privatepension/ann.
Interest Dividends Rent/royalties
Source: Social Security Administration, Income of the Population 55 or Older, 2010, Table 2.A1.
Retirees Depend on Social Security Social Security as Percent of Income, 2010
21%27%
11%
28%32%
43%
20%
41%
58%
72%
47%
66%
Total, 65+ 80+ Married couples,65+
Nonmarried, 65+
100% 90% or more 50% or more
Source: Social Security Administration, Income of the Population 55 or Older, 2010, Tables 8.A1 and 8.A2.
Social Security Will Remain a Critical Income Source in the Future
51.0%
13.3% 11.0% 9.3% 7.8%4.3% 2.0% 1.2%
Projected Share of Total Median Income at Age 70 from Source for Middle-Income Americans Ages 25–54 in 2012
Source: Barbara A. Butrica and Mikki D. Waid, What Are the Retirement Prospects of Middle-Class Americans? Washington, DC: AARP, 2012.
Earnings Go to a Growing Percentage of Older Americans
Percent Reporting Earnings
23% 22% 22%26%
NA
40%44%
49%
1980 1990 2000 2010
65+ 65-69
Source: Social Security Administration, Income of the Population 55 and Older, 1980 (Table 1); Table 1.1 in Income of the Population 55 or Older 1990 , 2000 , and 2010 .
Men Were the Cause of Post-War Drop in Older (55+) Labor Force Participation
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
19
48
19
52
19
56
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
20
00
20
04
20
08
20
12
Men
Both sexes
Women
Source: U.S. Bureau of Labor Statistics, Labor force statistics from the Current Population Survey at http://data.bls.gov/pdq/querytool.jsp?survey=ln.
Boomer Men Far Less Likely to Be in Labor Force Today than Peers in Past
Participation Rates of Persons Aged 55–64
15%
25%
35%
45%
55%
65%
75%
85%
95%
19
48
19
52
19
56
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
20
00
20
04
20
08
20
12
Men
Both sexes
Women
Source: U.S. Bureau of Labor Statistics, Labor force statistics from the Current Population Survey at http://data.bls.gov/pdq/querytool.jsp?survey=ln.
Older Americans Push Back Date of Labor Force Exit
Actual and Projected Labor Force Participation Rates*
54.2%
64.2%
43.8%
18.4%
64.5%
72.5%
55.2%
32.1%
68.8%
76.3%
60.9%
37.8%
55–64 55–59 60–64 65-69
1985 2012 2020
*Both sexes.Source: U.S. Bureau of Labor Statistics, Labor force statistics from the Current Population Survey at http://data.bls.gov/pdq/querytool.jsp?survey=ln; Mitra Toossi, Monthly Labor Review, January 2012, table .
Boomers Expect a Working RetirementPercent Expecting or Planning to Work in Retirement
80% 79%
70%
80%
1998 2003 2007* 2011
*Wording for this survey differed somewhat from the other surveys.Source: AARP, Baby boomer surveys conducted in 1998, 2003, and 2011; Staying Ahead of the Curve 2007: The AARP Work and Career Study (respondents were aged 45–54; 2007 figure refers to boomers only).
But the Best Laid Plans Often Go AwryExpected vs. Actual Retirement Age
3%
6%
14%
25% 25% 26%
21%
16%
32%
11%
8%6%
Under 55 55–59 60–64 65 66–69 70+
Expect to retire* Actually retired*
*When workers expect to retire and when retirees did retire.Source: Employee Benefit Research Institute, Changing Expectations about Retirement, 2013 Retirement Confidence Survey Fact Sheet #2.
And Boomers Don’t All Want to WorkPercent Agreeing that Statement Applies to Them
43%
41%
43%
37%
42%
37%
0% 10% 20% 30% 40% 50%
Can't wait to retire
Won't want to stop working
1998
2003
2011
Source: AARP, Baby Boomers Envision What’s Next? 2011.
Investment Advice—It Pays to Work Longer
• If you expect to work in retirement, don’t retire until you have a job in hand. It is easier to keep a job than get one.
• Think later retirement—even by one year
• Hold off collecting Social Security. Each year of postponement returns 7–8 percent in benefit increases.
• Workers have some control over when to retire.
It Pays to Work Longer--2
Each year of working is
• Another year to save
• Another year to contribute to a 401(k) and get employer match if offered
• Possibly a year of higher earnings to replace a lower earnings year in the Social Security benefit calculation
• Replacement of a year of zero earnings for workers without 35 years of coverage in the Social Security benefit calculation
• One year less of retirement to finance
Many Boomers Faced Setbacks in Great Recession
41%
32%
27%
21%
16%
14%
3%
None of the above
Housing value fell substantially
Exhausted all savings
Fell behind on credit card/more debt
Trouble paying rent/mortgage
Lost health insurance
Filed for bankruptcy
Hardships boomers or families experienced in recession.Source: AARP, Boomers and the Great Recession, 2012.
Boomers Saw Income Decline in Recession
69%
60%
30%
65%
58%
30%
65%
58%
32%
62%57%
31%
45–54 55–64 65+
*Inflation adjusted median household money income by age of householder, 2007–2010.*Source: General Accountability Office, GAO-12-76, Income Security: Older Adults and the 2007-2009 Recession, October 2011.
Who Experienced Hardship/Setbacks?*
49%
58%64%
75%
83%
Employed, norecent
unemployment
Out of the laborforce
Retireesreturning tolabor force
Employed butrecently
unemployed
Currentlyunemployed
*Base: Boomers who experienced hardship during the Great Recession.Source: AARP, Boomers and the Great Recession, 2012.
Setbacks Even for the Steadily Employed, but Job Losers Worst Off*
29%
18% 17%
11%
5%2%
40%43%
31%
27%30%
6%
38%
46%
29% 29%31%
6%
Housingvalue decline
Exhaustedsavings
Fell behindon credit card
Troublepaying
rent/mort.
Lost healthins.
Filed forbankruptcy
Steadily employed Employed, recent unemployment Unemployed
*Base: Boomers who experienced hardship during the Great Recession.Source: AARP, Boomers and the Great Recession, 2012.
Boomers Who Have Taken Steps to Prepare for Retirement*
75%
60%56%
47%
38%
Retireesreturning tolabor force
Employed, norecent
unemployment
Out of the laborforce
Employed butrecently
unemployed
Currentlyunemployed
*”Have you (or your spouse/partner) taken any steps to prepare for a more secure retirement/make sure you can retire when you want to/make sure your retirement resources will be adequate?”Source: AARP, Boomers and the Great Recession, 2012.
Steps Boomers Have Taken to Prepare for a Secure Retirement*
23%
24%
25%
34%
36%
39%
40%
43%
Decided to pay off mortgage
Spouse/part. will likely work in ret.
Changed where savings invested
Moved to less risky assets/savings
Put off retirement date
Save more for retirement
Pay down non-mortgage debt
Will likely work in retirement
*Eight most frequent actions. Base: The 54 percent of all boomers who had taken steps to prepare for more secure retirement/retire when they want to.Source: AARP, Boomers and the Great Recession, 2012.
Who Changed Their Expected Retirement Date?*
38% 37%
43%
52% 52%
Employed, norecent
unemployment
Out of the laborforce
Retireesreturning tolabor force
Employed butrecently
unemployed
Unemployed
*Base: Boomers who reported that the age at which they expected to be fully retired had changed in the previous 3 years.Source: AARP, Boomers and the Great Recession, 2012.
It Is Almost Always a Later Retirement Age*
53%
72%
81%86% 87%
Out of the laborforce
Retireesreturning tolabor force
Unemployed Employed, norecent
unemployment
Employed butrecently
unemployed
*Base: Boomers who changed their expected retirement age in the previous 3 years: “I expect to retire later (at an older age)than I previously planned.”Source: AARP, Boomers and the Great Recession, 2012.
Boomers Express Concerns about Retirement
0% 10% 20% 30% 40% 50% 60%
Leaving $ to kids
Being able to stay in home
Maintaining reasonable living standard
Depleting all savings
Having enough money for health care
Having enough money for LTC*
Income not keeping up with inflation
Very concerned Somewhat concerned Not too/not at all concerned
*Concern about having enough money for a long period of long-term care.Source: AARP Boomers and the Great Recession, 2012.
Boomers Should Be Concerned: Many Will Not Have Enough
Projected Income Replacement Rate =10% Below Target
53%
61%
54%
44%
All income levels Low income Middle income High income
Source: A. H. Munnell, A. Webb, and F. Golub-Sass, Center for Retirement Research at Boston College The National Retirement Risk Index: An Update, 2012. Estimates are for 2010.
Boomers Don’t Expect What Their Parents Had*
Anticipated Retirement Living Standard Compared to Parents
18%
30%
23%
15%
7%
Much worse
Somewhat worse
About the same
Somewhat better
Much better
*Compared to your parents or people in your parents’ generation, do you think your standard of living in retirement will be muchbetter, somewhat better, about the same, somewhat worse or much worse than theirs?”Source: AARP Boomers and the Great Recession, 2012.
Boomers Anticipate Less Retirement Security than Parents Had*
15%
51%
20%
14%
Don't know
Less secure
About the same
More secure
*”Thinking about your own retirement and the retirement security of people in your parents’ generation, do you expect th have a more or less economically security retirement than your parents had (or have)?”Source: AARP Boomers and the Great Recession, 2012.
Eyeing the Future
• Boomers’ confidence about managing financially in retirement has been shaken.
• Even boomers who remained employed throughout the recession were concerned about maintaining a reasonable standard of living in retirement, having enough money to pay for adequate health care, or depleting their savings.
• Uncertainty about job security, investments, and savings adequacy among boomers will likely mean longer worklives for those who can work and possible reductions in living standards for those who cannot.
Options to Promote Well-being in Retirement
• Training, training, training
• Job-search assistance
• Encouraging saving
• Better monitoring and enforcement of age discrimination laws
Options to Promote Well-Being--2
• More flexible work arrangements
• Advice on and, where appropriate, support for entrepreneurship
• Protect Social Security