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National Retirement Risk Index Surges Amidst Low Interest Rates, Declines In Housing Wealth, Shift In Retirement Age

The latest update to the Boston College Center for Retirement Research’s National Retirement Risk Index (NRRI), underwritten by Prudential Financial (NYSE: PRU), reveals a nine percentage point jump to 53 percent of households at risk of being unable to maintain their pre-retirement standard of living in retirement. The results, which were announced today, are based on the Federal Reserve’s 2010 Survey of Consumer Finances and reflect changes from the 2007 survey data.

“The significant increase in the number of households at risk reflects the dramatic change in the economic environment between 2007 and 2010, as well as the gradual rise in the full Social Security retirement age from 65 to 67,” said Christine Marcks, president of Prudential Retirement. “The index reflects a decline in equity values and housing wealth, as well as low interest rates. While equity markets have risen since 2010, depressed housing values and continued low interest rates remain significant challenges to Americans’ ability to achieve retirement security.”

The latest data shows that while the impact of the financial crisis was felt far more acutely by older households, younger Americans are at the greatest retirement risk. Between 2007 and 2010, the retirement risk index for households between ages 50 and 59 rose by more than a third, increasing from 32 to 44 percent. The index also increased from 53 to 62 percent for 30-to 39-year-olds; the higher levels of risk for younger households reflect the increase in the Social Security full retirement age and the need for retirement income to last over longer life spans.

A Prudential white paper , “Planning for Retirement: Protecting Retirement Income Against Key Risks,” which accompanies the release of the NRRI, highlights the impact that a sustained low interest rate environment, continued market volatility and increased longevity have on retirement security.

“At a time when Americans have an increased risk of not being able to achieve retirement security, the value of income certainty in retirement has never been more important,” added Bob O’Donnell, president of Prudential Annuities. “While Social Security and guaranteed income products have a key role to play, the bottom line for most households is that they will need to save more for retirement if they are to maintain the standard of living they desire.”

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