The Dow Jones Industrial Average dropped nearly 1,200 points in a single day this week because of the coronavirus’ impact on global trade, leaving many Americans sick with worry.
It’s not just a rapidly spreading, mysterious disease that made Americans feel vulnerable. The Dow’s freefall erased millions of dollars from retirement accounts and exposed another kind of epidemic—retirement insecurity.
There once was a time when the combination of company pension plans, Social Security and personal savings could carry retirees through their golden years.
No longer. Most companies eliminated defined-benefit plans providing a reliable income stream and implemented 401(k) plans that leave workers at the mercy of stock market volatility, like the kind that rattled investors this week and crushed workers in 2008.
Today, Americans have so much angst about the future that about 29 percent of baby boomers, 36 percent of Gen Xers and 77 percent of millennials fear they’ll never be able to retire or will have to work past normal retirement age.
Americans work hard so they can provide for their families and enjoy retirement. But no matter how carefully they plan, their retirements depend on factors beyond their control.
Patricia Cotton, a home health aide in Maryland, lost half of her $150,000 investment nest egg in the 2008 recession and retired 12 years later than planned.
In all, Americans lost about $2.4 trillion in retirement earnings during the second half of 2008, and the average household lost a thirdof its net worth.
Cotton was one of many who experienced losses so severe that they had to work longer than intended. The memory of the 2008 recession still gives Americans retirement jitters, and stock market drops like the ones this week compound the fear.
Before 401(k) plans dominated the retirement landscape, companies provided defined-benefit pensions. Workers earned specific—defined—amounts based on their wages and years of service. When workers retired, the employer provided those amounts no matter how the stock market fared.More ...