The index found that 51% of Americans are not prepared to retire at age 65, compared to 44% in 2007. This is a conservative estimate, considering the latest update does not factor in the costs of health care or long-term care, according to a release from Nationwide Mutual Insurance Company, which releases the Index along with CRR.
According to a CRR announcement, the NRRI increased to 51% due to the bursting of the housing bubble; the stock market crash; and the ongoing rise in Social Security’s full retirement age.
The first NRRI Index was issued in 2006 and was based on the Federal Reserve’s 2004 Survey of Consumer Finances, a triennial survey of U.S. households, which collects detailed information on households’ assets, liabilities, and demographic characteristics. The 2007 Index was issued based on the Federal Reserve’s 2007 Survey of Consumer Finances; however, Alicia H. Munnell, CRR director, said a new update is needed.
“While the release of the Federal Reserve’s 2007 Survey of Consumer Finances seemed like a great opportunity to reassess Americans’ retirement preparedness, the survey reflects a world that no longer exists,” Munnell said. “Between the time of the survey’s interviews and the second quarter of 2009, equity holdings declined by $7 trillion and housing values dropped by $3 trillion. Thus, two updates are required—one to show what the NRRI looked like in 2007 and one to show what it looks like today.”
The CRR’s report, “The National Retirement Risk Index: After the Crash,” can be downloaded here.