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Rebounds In Equities And Housing Fail To Substantially Improve Retirement Security

Rebounds in the equity and housing markets have not had a significant impact on the retirement prospects of many Americans, according to new research sponsored by Prudential Financial, Inc.

In a paper published today, the Center for Retirement Research (CRR) at Boston College found that despite a 45 percent real increase in equity prices since 2010, and a six percent real increase in home prices over the same period, the impact on retirement security was only modest.

The research was conducted to determine the overall impact of the rebound in the equity and housing markets on the The National Retirement Risk Index (NRRI), which measures the share of working-age American households at risk of being unable to maintain their standard of living in retirement. The last update to the NRRI, published in October 2012, and based on 2010 data, found that 53 percent of households were at risk. The NRRI is sponsored exclusively by Prudential.

A new Prudential paper, “Planning for Retirement: The Impact of Market Recoveries on Retirement Preparedness,” summarizes the latest NRRI research and also highlights three critical ways to improve Americans’ retirement security:
  • Savings: making sure individuals save enough for retirement
  • Coverage: making sure individuals have access to a workplace retirement plan
  • Retirement Income: making sure individuals can efficiently and prudently convert their retirement savings to retirement income

“Market conditions clearly have an impact on retirement savings,” says Christine Marcks, president of Prudential Retirement. “However, what's even more important to ensuring a secure retirement are adequate personal savings, having access to a workplace retirement plan, and being able to convert retirement savings into retirement income.”

The CRR’s research further found that, if 2010 equity and home prices had been at 2013 levels, the NRRI would have been 50 percent instead of 53 percent (see Exhibit 1). The CRR concludes that while fluctuations in the markets will have some impact on the NRRI, half of today’s working households remain at risk and will need to work longer and/or save more to improve their retirement prospects.

Exhibit 1. Percent of Households ‘At Risk’ at Age 65 by Income Group
Income group   2004   2007   2010  

2010w/2013AssetPrices
All   45%   44%   53%   50%
Low income 52 54 61 60
Middle income 44 43 54 52
High income   39   35   44   40
 

Source: Center for Retirement Research

Additional research sponsored by Prudential and conducted this year found that employers share the same concerns raised by the NRRI. In a survey of senior finance executives, 65 percent indicated that they believed a significant portion of employees will have to delay retirement due to inadequate savings. Employers expressed concern about the impact of workers’ delayed retirements on workforce costs, employee morale and talent retention.

Prudential Financial, Inc. (NYSE:PRU), a financial services leader, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit http://www.news.prudential.com/. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company, Hartford, CT, or its affiliates.

The Prudential Insurance Company of America and its affiliates, Newark, NJ.

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