Between 4 percent and 14 percent of Americans who otherwise would have had a sufficient income stream in retirement became “at risk” of running short because of the housing and financial crisis of 2008-2009 according to a new report, “A Post-Crisis Assessment of Retirement Income Adequacy for Baby Boomers and Generation Xers,” by the Employee Benefit Research Institute (EBRI). Not surprisingly, the likelihood of becoming “at risk” depends on the size of the retirement account balances as well as exposure to the housing market.
A recent EBRI press release poses the question: How much additional money would these households need to save to make up for their losses from the crisis? According to EBRI, “early Boomer” households “would generally need to save between 1 percent and 4 percent of compensation more each year between now and retirement age.” Of course that percentage is quickly followed by a disclaimer that the answer “varies greatly and depends on several key factors, such as the size of account balances and exposure to the equity market, proximity of the household to retirement age, the relative level of preretirement income, and the desired probability of adequate retirement income.”
There’s never a painless fix when you are caught short. You can work longer, save more, or cutback on your retirement lifestyle. According to a report, “Responding to the Downturn: How Does Information Change Behavior?” by Norma B. Coe and Kelly Haverstick, from the Center for Retirement Research at Boston College most pre-retirees would choose to work longer rather than save more or reduce their standard of living in retirement.