The Effects of the Great Recession on the Retirement Security of Older Workers

Abstract

The Great Recession had a profound effect on the retirement security of older Americans, and the slow recovery from the downturn will have a lasting impact on their quality of life. The nature of today’s retirement system left older households exposed to the collapse in the equity and housing markets and induced many to plan for a later retirement. More late-career workers experienced job loss than in previous recessions, often with long jobless spells, encouraging a record number of early Social Security retirement claims and disability applications. Going forward, workers who lost a job can expect lower earnings and more instability and, potentially, poorer health. Even households that avoided job loss will have less money available for spending in retirement due to low interest rates and reduced home values. These findings emphasize the importance of Social Security as income insurance and the need for a more robust retirement income system.

Point of No Return: How Do Financial Resources Affect the Timing of Retirement after a Job Separation?

“…Older workers, understanding that their retirement years will be, in all likelihood, longer and less secure than the previous generation, report time and again that they plan to work longer (Munnell and Rutledge 2013). Yet the proportion of older workers finding themselves jobless has increased over time, and the lure of retirement, instead of a difficult job search, may be hard to resist.…”

“…In previous recessions, the brunt of the job losses was borne by younger, lower-paid workers, and these workers again suffered the most in this recession. But the Great Recession also left older workers more exposed than ever before (Munnell and Rutledge 2013). The unemployment rate among those 55 and older reached a record 7.3 percent in August 2010, surpassing 6 percent for the first time since 1950.…”

“…Among people over 55, the labor force participation rate actually increased by a percentage point between 2007 and 2009. But this increase was concentrated among workers who had not yet reached age 62 and were not yet eligible for Social Security retirement benefits (Munnell and Rutledge 2013). Not coincidentally, more than half of the workers who lost their jobs after turning 62 left the labor force within nine months of their separations, as opposed to less than 30 percent of workers age 50-61 (Johnson and Butrica 2012).…”

How European pension promises changed in austere times: 2002–15

“…Economic globalisation was already assumed to exacerbate labour market inequalities and to shift investment risks for pension savings towards individuals who are not well equipped to carry them. The economic shock and its aftermath added to this pressure, through a sudden drop in the value of pension funds, a rise in the cost of annuities for individuals, through very low interest rates, through companies being more concerned about the costs of occupational benefits and through a loss in housing wealth (Antolín and Stewart 2009, p. 21;Munnell and Rutledge 2013;MacDonald and Osberg 2014, p. 316-19). The extent of the crisis was not expected when it came, but the vulnerabilities of the systems it exposed were well-known.…”

Reverse Mortgage Participation in the United States: Evidence from a National Study

“…The trend of increasing number of households retiring with inadequate savings is expected to continue, as many of the employer-sponsored retirement plans have moved from a defined benefit plan (in which employers guarantee a retirement pension) to a defined contribution plan (in which employers match employee contributions up to a point, but the responsibility for saving for retirement rests with the employee). Due to the two large stock market downturns over the past 15 years, many recent retirees may look favorably upon reverse mortgages as a way to supplement their retirement income needs [6][7][8]. Low participation rates of eligible households in the reverse mortgage market could be due to lack of information or to homeowners' suspicion of such products.…”