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Retirement Planning > Retirement Investing

Prudential: Market Peaks Lure Workers into Danger

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In a year in which the S&P 500 gains 10%, pre-retirees may be 25% more likely to retire than in a year in which the S&P 500 is flat.

Prudential Financial Inc., Newark, N.J. (NYSE:PRU), has published that finding in a summary of results from a new study that looked at the factors that make individuals more likely to retire in any given year.

Rui Yao, the researcher at the University of Missouri at St. Louis who conducted the study for Prudential, came up with a list of contributing factors that included strong stock market performance along with the retirement status of a spouse and participation in a defined benefit pension plan.

Yao analyzed elective retirement decisions of pre-retirees tracked from 1992 to 2008. The pre-retirees were ages 51 to 61 in 1992.

Yao found that that equity markets have a significant effect on individuals’ elective retirement decisions: A 1% increase in the S&P 500 index in any given year increases the probability that a pre-retiree will retire by 2.5% during that year.

“The study clearly shows that the stronger the equity market performs over any period, the more likely it is that near-retirees will, in fact, retire,” Yao says.

Yao further notes that pre-retirees with a retired spouse are 2.4 times more likely to retire in a given year than pre-retirees whose spouses are working.

And pre-retirees covered only by a defined benefit plan are 1.9 times more likely to retire in a given year than pre-retirees covered only by a defined contribution plan.

Yao adds that pre-retirees become more likely to retire the older they are and the higher is their net worth, after controlling for other variables, such as income.

Other retirement study coverage from National Underwriter Life & Health:


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