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

Alan Gustman (), Thomas L. Steinmeier and Nahid Tabatabai

No 15435, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the effect of the current recession on the near-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.

JEL-codes: D31 D91 E21 H55 I3 J14 J26 J32 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-age and nep-lab
Note: AG LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Alan L. Gustman, Thomas L. Steinmeier and Nahid Tabatabai. “What the Stock Market Decline Means for the Financial Security and Retirement Choices of the Near-Retirement Population”. Journal of Economic Perspectives, Winter, 2010, Vol. 24, No. 1: 161-182;
Published as Alan L. Gustman, Thomas L. Steinmeier and Nahid Tabatabai. Pensions in the Health and Retirement Study. Cambridge: Harvard University Press, May, 2010.

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