A new brief issued by the Center for Retirement Research (CRC) at Boston College measured behavior of retirement-age workers with relatively high retirement assets before the economic downturn. It may not be surprising to know about 57 percent of those surveyed initially reacted to their loss in savings by planning to work longer, save more, or both. Yet 43 percent of people said they would take no action – most likely “stunned into inaction,” researchers said.
However, when directed to choose explicit actions – save more, work longer, simply have less in retirement, or take no action – those who initially didn’t want to take action largely changed their minds and chose to take action. Those who said they would both save more and work longer, instead of just one or the other, jumped from 9 to 51 percent.
Researchers concluded that being forced to make explicit trade-offs not only spurred people to action who were previously not going to act at all, but also convinced those who were only going to take a single action to instead diversify.
Those who depend largely on their own financial assets for retirement and those with less-than-adequate retirement savings were, not surprisingly, more inclined to increase savings. However, those with previously high savings continued to want to save even more as well. Those most affected by the recession through job uncertainty (rather than stock market losses) are less likely to plan on taking significant action of any kind.
Those who had thought quite a bit about the impact of the downturn on their financial situation were more likely to not want to change their behavior. Researchers think this set of people – planners by nature – had already taken into account the trade-off actions and had their plans set in place.
When many lost a significant portion of their retirement assets – as much as one-third of their savings, according to the CRC – in the downturn, financial experts agreed that these workers must save more or work longer if they expected to maintain their current standard of living during retirement and make up for losses.
This brief, the third installment of a four-part series dedicated to measuring retirement savings behavior in the U.S., included survey results from a nationally representative sample of 45-59 year olds who had at least $50,000 in retirement accounts before the stock market collapse.
To read the entire brief, click here.
Written by Clare Pierson