Economic Downturn Derailed at least 4% of Retirement Savers
The findings show 3.8% to 14% of Americans who were on track are now at risk of running short because of the economic downturn. EBRI says Early Boomer households would generally need to save between 1% and 4% of compensation more each year until they reach retirement. The variation depends on factors such as account balance, exposure to the equity market and how close the person is to retirement, EBRI said.
The study also finds that additional savings depends on how much of a chance of success a saver desires. For instance:
- The median percentage of additional compensation for Early Boomers wanting a 50% probability of retirement income adequacy are 3% of compensation each year until retirement age, to account for the financial and housing market crisis in 2008–2009. Similar values are 0.9% for Late Boomers and 0.3% for Gen Xers.
- For a 70% probability of adequacy, these numbers increase correspondingly, with the largest impact on those closest to retirement age. The median percentage of additional compensation for Early Boomers wanting a 70% probability of adequacy is 3.8%, in order to account for the financial and housing market crisis.
- The median percentage of additional compensation for Early Boomers wanting a 90% probability of adequacy is 4.3% to account for the financial and housing market crisis
The analysis is based on data from EBRI’s 2010 Retirement Security Projection Model (RSPM) and EBRI’s 2010 Retirement Readiness Rating (RRR), which provide a benchmark for Americans’ prospects of having sufficient resources to cover basic expenses and uninsured health expenses in retirement.
More about the study is here.