The recession caused 40 percent of older Americans to postpone retirement.
The typical household lost about 5 percent of its total wealth between the summers of 2008 and 2009, according to Brooke Helppie McFall, an economist at the University of Michigan Institute for Social Research (ISR).
“The average person would need to work between 3.7 and 5 years longer than they planned in order to make up the money they lost,” she said.
Helppie McFall also found that when considering when to retire, people “make trade-offs between their desire for more leisure and for more time to spend with friends and family, and their desire to be financially secure in retirement. So the typical person we surveyed who planned to work longer because of the recession only planned to work about 1.6 years longer than they had originally planned. That isn’t long enough to make up what they lost, but they’re trading off time for money.”
Helppie McFall conducted the analysis by using data from 900 participants in two ISR studies: the Health and Retirement Study and the Cognitive Economics Study, with funding from the National Institute on Aging.
Those interviewed for the studies were pessimists that the stock market would rebound within the next year, and people who were within two years of their initial retirement age were the most likely to say they planned to work longer.
Those who lost more in the economic downturn were the most likely to postpone their retirement, but most didn’t decide to work long enough to make up their losses, she said.