This month marks 10 years since the collapse of the Lehman Bros. investment bank. In the financial crash and Great Recession that followed, millions of Americans lost their homes and jobs and saw their prospects for a secure retirement damaged.
A decade later, while the economy has recovered by most standard measures, the picture remains very mixed on retirement security.
First, look at home values, a critical component of retirement security since home equity is a more important component of net worth than financial assets for older households. In August, housing prices adjusted for non-housing inflation were 9 percent below 2006, according to Jonathan Spader, senior research associate at the Joint Center for Housing Studies.
And homeownership data for preretirees points to a more worrisome trend. The foreclosure crisis had a relatively small impact on retired households — homeownership fell at the smallest rate for any age group. But among households of those age 55 to 64, the homeownership rate fell from 82 percent in 2004 to 75 percent in 2017.
The share of households over age 65 carrying mortgage debt into retirement also has risen — 41 percent in 2016, compared with 35 percent in 2007, and up from 22 percent in 1995.
Meanwhile, many Americans don’t have enough retirement savings. While the stock market has rocketed ahead more than fourfold since March 2009, the gains are concentrated in the top third of earners in the country, who held roughly 87 percent of all equities in 2016, according to the Center for Retirement Research at Boston College.
Among the top 10 percent of U.S. households, the median value of their retirement holdings jumped 70 percent from 2007 to $403,000 in 2016, according to the most recent Federal Reserve Survey of Consumer Finance (SCF). For middle-income groups, account values were stagnant or slightly down — a staggering finding considering the strong market gains.
“When you disaggregate the data, you see that households who had more invested to start with have rebounded, but others are just trying to claw their way back,” said Monique Morrissey, an economist with the Economic Policy Institute.
The big picture: 10 years after the collapse of Lehman Bros., retirement security in the United States is a tale of two realities. The affluent have recovered just fine, while lower- and middle-class households face a very uncertain retirement.
Mark Miller writes for Reuters.