If some of your retirement-planning clients seem to be giving up on their plans, your impression might be correct.
A recent update of the National Retirement Risk Index (NRRI) quantifies the impact of the recession of 2008 and 2009 on retirement readiness for households across the United States.
The Center for Retirement Research at Boston College has released an update of the NRRI that shows a seven percentage-point drop in the share of households that are positioned to maintain their current standard of living in retirement.
At the same time, the NRRI underwriter, Nationwide Mutual Insurance Company, says its own research is showing signs that many who were actively preparing before the downturn have now disengaged from the process.
The updated National Retirement Risk Index includes assumptions accounting for the economic turmoil. It finds that 51 percent of Americans are not prepared to retire at age 65 compared to 44 percent in 2007.
This is a conservative estimate, considering the latest update does not factor in the costs of health care or long-term care. The update underscores how plummeting asset values and the continuing rise in Social Security’s full retirement age combine to negatively affect retirement readiness.
“Our research shows that the financial turmoil has driven up the share of households ‘at risk’ of being able to maintain their standard of living in retirement,” says center director Alicia H. Munnell. “We are clearly facing a retirement crisis – one that will continue to grow as younger workers age. To overcome today’s retirement challenges, people need help understanding financial topics so they can make reasonable financial choices throughout their lives.”