The Slightly-Bright Side for Boomers in the Recession
A new working paper (full version here) by Alan L. Gustman, Thomas L. Steinmeier, and Nahid Tabatabai examines the impact the Great Recession has had on the wealth and income of Baby Boomers nearing retirement. It finds, somewhat surprisingly, that their aggregate wealth decreased very little over the past few years:
The retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percentage points by 2010. … Very few in the population nearing retirement age have experienced multiple adverse events. Although most of the loss in wealth is due to a fall in the net value of housing, because very few in this cohort have found their housing wealth under water, and housing is the one asset this cohort is not likely to cash in for another decade or two, there is time for their losses in housing wealth to recover.
The study finds that this cohort of “Early Boomers” for the most part emerged from the housing meltdown relatively unscathed. Only five percent of Early Boomer households had negative housing wealth by 2010, compared to 23.1 percent of all mortgaged households that are underwater. Also, the value of Social Security and pensions, which accounts for 55 percent of retiree wealth, has remained stable. This is good news for Boomers on the lower-rungs of the socio-economic ladder — the bottom quartile of wealth holders lost only 1 percent. In general, wealthier households experienced a sharper loss of wealth than poorer ones:
The share of households experiencing at least a 20 percent decline in real wealth ranges from 12 percent of households falling in the lowest wealth decile up to 48 percent of households in the highest wealth decile.