How Is the Financial Crisis Affecting Retirement Savings?

decline of about $11 trillion. These losses have reduced the retirement savings of older Americans. How Much Have Retirement Accounts Fallen? • Assets in retirement accounts (defined contribution plans and IRAs) reached $8.7 trillion on September 30, 2007. About 70 percent of these assets were invested in stocks. As of December 2, 2008, retirement accounts have lost $2.8 trillion, 32 percent of their value (figure 1). How Is the Financial Turmoil Affecting Older Americans? • Older households typically hold less in stocks and are thus less exposed to market fluctuations than their younger counterparts. Nonetheless, equities account for about half of the assets in the typical account of households age 50 and older. Additionally, a loss disrupts retirement plans more for households nearing retirement than for those with many years before retirement, because older households have less time to recover. • The plummeting value of retirement assets could force older adults to delay retirement and remain at work and could encourage some retirees to return to work. However, contracting credit markets could weaken the labor market, limiting employment opportunities for older adult