More than 1-in-5 American survey respondents who were adults when the Great Recession began in December, 2007 now say that their retirement savings are worse now than they were before it hit the market, according to a survey conducted by personal finance website Bankrate. This may be because the effects of the Recession were underestimated, according to Mark Hamrick, senior economic analyst at Bankrate in an interview with Fox Business.
“The echoes of the Great Recession remain very present in the financial lives of many Americans, despite the improvement in the broader economy,” Hamrick said. “While some have managed to prosper in the decade since, there are still tens of millions who are struggling to even get back to where they were before the economy took a turn for the worse.”
Underestimating the impact of the Great Recession is likely to blame, at least partially, for those who report worse economic savings now than before its onset, Hamrick explains.
“Our survey found, for example, that of those with retirement savings at the start of the downturn, nearly 1-in-5 tapped into that money to some extent,” he says. “That means they had ground to make up. Further, of those with emergency savings when the recession began, about 1-in-4 depleted that savings cushion entirely.”
Another factor that is limiting the recovery of some of those who lost financial ground is the slower growth of wages in comparison to other parts of the economy, he says.
“It is important to remember that not all expansions and recessions are created equal,” Hamrick explains. “While the downturn was exceptionally severe, ultimately regarded as the worst since the Great Depression, there have been some less-than-stellar aspects of the expansion which has followed. While the duration of the expansion has been historic, wage gains have largely been less than substantial and sustained.”
Because most Americans rely on income gained from work to improve their overall station and standard of living, a lack of more robust wage growth has hampered their economic recovery, Hamrick says. This could also spell additional trouble when the next economic recession takes place.
“While we don’t know when the next recession will begin exactly (and can’t know either its depth or length), it will likely erode the financial standing of many Americans once again through unemployment and losses in investments and income,” Hamrick says.
Read the full interview at Fox Business.