By Cyril Tuohy
Call it the big disconnect. Roaring stock prices and the solid rebound in the housing market have only led to a “modest” improvement in the prospects of Americans’ retirement security, new research published by the Center for Retirement Research (CRR) at Boston College shows.
The upshot is that many working households remain at risk of not being able to maintain their standard of living in retirement , and Americans can be expected to work longer or save more as a result if they intend to maintain that standard.
In 2010, a total of 53 percent of households among all income groups were considered “at risk” of not being able to maintain their standard of living in retirement, according to the National Retirement Risk Index (NRRI).
Assuming 2010 equity and home prices at 2013 levels, only 50 percent of households would be able to maintain their living standard in retirement, a slight improvement over 2010, according to the CRR research.
The improvement in the risk index of only 3 percentage points is surprisingly modest considering the 45 percent increase in equity prices since 2010, and the 6 percent increase in home prices over the same period, the researchers found.
Households in the highest income bracket did best, with 40 percent considered “at risk” in 2010 with 2013 asset prices, down from 44 percent at risk in 2010, a drop of 4 percentage points.
CRR’s latest research reinforces the importance of savings and putting money away for later years. The report also sounds a cautionary note about the limits of asset values as a tool to fund the future. Surging stock markets often lull people into thinking they have more than they really do – only to realize how much of a savings opportunity they have lost when markets decline.
“The latest analysis by the CRR indicates that, despite a strong rebound in the stock market and a modest rebound in housing, Americans’ retirement prospects have not meaningfully improved,” the NRRI research note said.
Christine Marcks, president of Prudential Retirement which sponsored the research, said in a statement that there’s no substitute for personal savings and signing up through a retirement plan at work for those people with access to one.
Senior executives also share many of the retirement concerns workers express about themselves.
As many as 65 percent of top executives said large numbers of workers will have to delay retirement if they want to maintain the standard of living they enjoyed while employed, according to supplemental research by Prudential.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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