Although those nearing retirement did suffer losses from the Great Recession of 2007 to 2009, most of the losses were in housing wealth, according to a new report by the University of Michigan Retirement Research Center.
Using asset and labor market data from the Health and Retirement Study, the organization examined the population that was just reaching retirement age when the recession hit, those aged 53 to 58 in 2006. This age group has had little time to recover losses from the recession before retiring.
The organization found that there have been adverse effects on this group, with an average real wealth decline of 2.8 percent between 2006 and 2010. The sharpest decline was in net housing wealth, which fell 23 percent.
The good news about the drops in housing is that most people nearing retirement don’t plan to sell their home anytime soon so they have time to make up those losses, according to the report.
Social Security and pension plans, which accounted for 55 percent of total wealth in this group, cushioned the decline. Overall pension wealth remained steady despite a 50 percent increase in IRA wealth, where most of the change in IRA balances was probably due to pension rollovers.
Those in the bottom quartile of wealth holding households experienced only a 1 percent fall in real wealth and Social Security accounted for 79 percent of their total wealth.
Near-retirees did accumulate less wealth during the recession than older generations over the same time frame. Those who were 6 to 12 years older averaged a 5 percent increase during those same four years.
The report concluded that the adverse labor market effects of the Great Recession were more modest. Although there was an increase in unemployment, that increase was not mirrored in a decline in full-time work or partial retirement. All told, the retirement behavior of the Early Boomer cohort looks similar to the behavior observed for members of older cohorts at comparable ages.