AARP Survey Shows U.S. Economy's Woes, Stock Declines Cloud Outlook for Big Demographic GroupOne in five middle-aged workers stopped contributing to their retirement plans in the last year, and one in three has considered delaying retirement, according to a new survey by AARP, an advocacy group for older Americans.
The numbers, from an AARP survey conducted last month, provide the latest evidence that the deteriorating economy and stock market are creating a less-than-golden outlook for the huge tide of baby-boom Americans surging into retirement age. This demographic, born between 1946 and 1964, numbers around 78 million.
About 60% of U.S. workers in the private sector have 401(k) accounts, holding about $3 trillion in assets. Earlier surveys have shown workers don't put enough into 401(k)s to support their retirements, even as such plans have become the main source of retirement support, surpassing traditional fixed-benefit pensions. Labor Department statistics also show more Americans over 55 years old are staying in the work force, a sign that many can't afford to stop working.
Jean Setzfand, who directs AARP's financial-education efforts and oversaw the survey, said most respondents believe they need to contribute more to their retirement accounts, but those who have stopped are "having trouble making ends meet for basic expenses like food, gas and utilities."
The survey, which covered 1,628 employed people over 45 years old, found that 20% had stopped participating in their retirement accounts in the past year, and 34% contemplated putting off retirement. Twenty-seven percent said they were having trouble making rent or mortgage payments.
More people have been pulling money out of their nest eggs before age 59-1/2, even though such withdrawals bring a tax penalty. The AARP survey found that 13% "prematurely withdrew funds" from investments such as individual retirement accounts and 401(k) plans.
The AARP, which invites people to join when they turn 50, has some 40 million members. Its poll was conducted during a three-week period ending Sept. 21 -- before the worst of the stock market's recent swoon, when retirement accounts were heavily weighted toward stock mutual funds. The turmoil since then might have caused many investors to question the wisdom of plowing funds into investments.
Of the people who stopped making retirement-plan contributions, 83% said they didn't have enough money left over after current expenses. "People are trying to get through the day, and worry about the future later," Ms. Setzfand said.
The survey found that people who have a high-school degree or less were more likely to have stopped saving -- 24% compared with 16% of others surveyed. People with incomes less than $30,000 a year, Hispanics, and women were also more likely to stop retirement saving.
By: William Bulkeley
Wall Street Journal; October 7, 2008
