A confluence of factors is playing a major role in America’s troubling retirement security situation. A drop in housing wealth and a decline in equity values coupled with a protracted low interest rate environment and an increase in Social Security’s full retirement age have rendered many Americans underprepared for a comfortable retirement.
A recent Prudential Financial (Prudential) paper, which examined the National Retirement Risk Index (NRRI)—a measure of the number households at risk of not being able to preserve their pre-retirement standard of living in retirement found that 53 percent of American households are at risk, a jump of nine percentage points over a three-year period.
The index, which is sponsored by Prudential and published by the Center for Retirement Research (CRR) at Boston College, took a close look at the impact interest rates were having on the NRRI.
With news that the Fed was contemplating a relaxing of their quantitative easing program last week—giving the market the jitters—it would be safe to assume that Mr. Bernanke will keep interest rates at historic lows for the foreseeable future.