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How Did the Recession of 2007-2009 Affect the Wealth and Retirement of the Near Retirement Age Population in the Health and Retirement Study?

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  • Alan L. Gustman

    (Dartmouth College and NBER)

  • Thomas L. Steinmeier

    (Texas Tech University)

  • Nahid Tabatabai

    (Dartmouth College)

Abstract

This paper uses asset and labor market data from the Health and Retirement Study (HRS) to investigate how the recent "Great Recession" has affected the wealth and retirement of those in the population who were just approaching retirement age at the beginning of the recession, a potentially vulnerable segment of the working age population. The retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percentage points by 2010. In more normal times, their wealth would have increased over these four years. Members of older cohorts accumulated an additional 5 percent of wealth over the same age span. To be sure, a part of that accumulation was the result of the upside of the housing bubble. The wealth holdings of poorer households were least affected by the recession. Relative losses are greatest for those who initially had the highest wealth when the recession began. The adverse labor market effects of the Great Recession are more modest. Although there is an increase in unemployment, that increase is not mirrored in the rate of flow out of full-time work or partial retirement. All told, the retirement behavior of the Early Boomer cohort looks similar, at least so far, to the behavior observed for members of older cohorts at comparable ages. Very few in the population nearing retirement age have experienced multiple adverse events. Although most of the loss in wealth is due to a fall in the net value of housing, because very few in this cohort have found their housing wealth under water, and housing is the one asset this cohort is not likely to cash in for another decade or two, there is time for their losses in housing wealth to recover.

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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp253.

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Length: 69 Pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:mrr:papers:wp253

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References

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  1. Richard W. Johnson & Corina Mommaerts, 2011. "Age Differences in Job Displacement, Job Search, and Reemployment," Working Papers, Center for Retirement Research at Boston College wp2011-3, Center for Retirement Research, revised Jan 2011.
  2. Alan L. Gustman & Thomas Steinmeier, 2009. "Integrating Retirement Models," NBER Working Papers 15607, National Bureau of Economic Research, Inc.
  3. Alan L. Gustman & Thomas L. Steinmeier, 2002. "Retirement and the Stock Market Bubble," NBER Working Papers 9404, National Bureau of Economic Research, Inc.
  4. Jesse Bricker & Brian K. Bucks & Arthur Kennickell & Traci L. Mach & Kevin Moore, 2011. "Drowning or Weathering the Storm? Changes in Family Finances from 2007 to 2009," NBER Working Papers 16985, National Bureau of Economic Research, Inc.
  5. Barbara A. Butrica & Richard W. Johnson & Karen E. Smith, 2011. "The Potential Impact of the Great Recession on Future Retirement Incomes," Working Papers, Center for Retirement Research at Boston College wp2011-9, Center for Retirement Research, revised May 2011.
  6. Rajashri Chakrabarti & Donghoon Lee & Wilbert van der Klaauw & Basit Zafar, 2011. "Household debt and saving during the 2007 recession," Staff Reports 482, Federal Reserve Bank of New York.
  7. Farber, Henry, 2011. "Job Loss in the Great Recession: Historical Perspective from the Displaced Workers Survey, 1984-2010," IZA Discussion Papers 5696, Institute for the Study of Labor (IZA).
  8. Henry S. Farber, 2011. "Job Loss in the Great Recession: Historical Perspective from the Displaced Workers Survey, 1984-2010," NBER Working Papers 17040, National Bureau of Economic Research, Inc.
  9. David A. Wise, 2004. "Introduction to "Perspectives on the Economics of Aging"," NBER Chapters, in: Perspectives on the Economics of Aging, pages 1-16 National Bureau of Economic Research, Inc.
  10. Courtney Monk & Kelly Haverstick & Steven A. Sass, 2010. "Workers' Response to the Market Crash: Save More, Work More?," Issues in Brief ib2010-10-3, Center for Retirement Research, revised Feb 2010.
  11. Courtney Coile & Phillip B. Levine, 2009. "The Market Crash and Mass Layoffs: How the Current Economic Crisis May Affect Retirement," NBER Working Papers 15395, National Bureau of Economic Research, Inc.
  12. Alicia H. Munnell & Dan Muldoon & Steven A. Sass, 2009. "Recessions and Older Workers," Issues in Brief ib2009-9-2, Center for Retirement Research, revised Jan 2009.
  13. Michael D. Hurd & Monika Reti & Susann Rohwedder, 2009. "The Effect of Large Capital Gains or Losses on Retirement," NBER Chapters, in: Developments in the Economics of Aging, pages 127-163 National Bureau of Economic Research, Inc.
  14. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
  15. Edward N. Wolff, 2011. "Pensions in the 2000s: the Lost Decade?," NBER Working Papers 16991, National Bureau of Economic Research, Inc.
  16. Michael Hurd & Susann Rohwedder, 2010. "Effects of the Financial Crisis and Great Recession on American Households," Working Papers 810, RAND Corporation Publications Department.
  17. Barry P. Bosworth & Gary Burtless, 2010. "Recessions, Wealth Destruction, and the Timing of Retirement," Working Papers, Center for Retirement Research at Boston College wp2010-21, Center for Retirement Research, revised Dec 2010.
  18. repec:crr:issbrf:ib2009-10-3 is not listed on IDEAS
  19. Ann Huff Stevens, 2008. "Retirement Wealth Across Cohorts: The Role of Earnings Inequality and Pension Changes," Working Papers wp186, University of Michigan, Michigan Retirement Research Center.
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Cited by:
  1. McInerney, Melissa & Mellor, Jennifer M. & Nicholas, Lauren Hersch, 2013. "Recession depression: Mental health effects of the 2008 stock market crash," Journal of Health Economics, Elsevier, vol. 32(6), pages 1090-1104.
  2. Alan J. Auerbach, 2012. "Societal Aging: Implications for Fiscal Policy," IMES Discussion Paper Series 12-E-12, Institute for Monetary and Economic Studies, Bank of Japan.

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