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How Do Pension Changes Affect Retirement Preparedness? The Trend to Defined Contribution Plans and the Vulnerability of the Retirement Age Population to the Stock Market Decline of 2008-2009
by Alan L. Gustman, Thomas L. Steinmeier and Nahid Tabatabai
WP 2009-206
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- The average person in their mid fifties is not likely to suffer a life changing financial loss from the stock market downturn of 2008-2009.
- Almost two-thirds of their pension wealth was held in defined-benefit plans (with only 15 percent invested in stocks) and one-quarter of their pension wealth consisted of future Social Security benefits.
- If workers postpone retirement due to their stock market losses in 2008-2009, we estimate that 9 percent will delay retirement by 1-2 years, but the average person will delay it for a only few months.
- However, increases in the number of job losses may force some people to retire sooner than planned, which may result in more earlier retirements overall.
- More women approaching retirement are covered by a pension than in past years and they account for a significantly larger share of household wealth.
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