Many Americans were hit hard by the Great Recession of 2008. A recent article states that, “the nation’s 401(k)s and IRAs lost about $2.4 trillion in the final two quarters of 2008, and the average loss that year for workers who had been on the job for 20 years was, according to one estimate, about 25 percent.” News headlines boast how the economy has picked up since then, indicating that retirement balances have improved. The S&P 500 was up an impressive 54% between 2009 and late 2011 and the GDP increased 10% during the same time period.1
However, according to Teresa Ghilarducci, author and professor of economic policy analysis at The New School for Social Research in NY, and her colleague, Joelle Saad-Lessler at The New School for Social Research, this may not be the full story. Ghilarducci and Saad-Lessler used federal government data to do a deeper dive into the performance of retirement accounts for both male and female workers aged 51-59 in 2009. They found that while the average retirement account balance increased approximately 7%, about 45% of the workers studied saw a sizeable decrease in their account balances between spring 2009 and fall 2011. Furthermore, their research found that the average gain was much smaller than what would have been needed to recover from the significant losses in 2008. Despite these losses, Ghilarducci and Saad-Lessler don’t recommend buying more stocks to make up for this shortfall. Rather, their research found that those who shifted their investments more towards cash and other safer options between 2009 and 2011 were more likely to gain a few thousand dollars than those that continued buying stocks.1
Ghilarducci and Saad-Lessler also believe that the current structure of the American retirement system will likely continue trending towards a downward mobility in retirement. “Of the 18 million workers aged between 55 and 64 in 2012, 4.3 million will be poor or near poor by the time they’re 65. And if current trends continue between 2013 and 2022, the number of poor or near-poor 65-year-olds will increase by 146 percent.” They feel that “These numbers are unlikely to change as long as retirement accounts are exposed to the fluctuations of financial markets and their uneven recoveries.”1
If you’re one of the many Americans whose investment portfolios were negatively impacted by the Great Recession, and you’re looking for a way to supplement your retirement income, a reverse mortgage may be able to help. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan. A HECM enables seniors to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3
If you’d like to learn more about reverse mortgages and see if you’re eligible, please use our Reverse Mortgage Calculator or call 800-218-1415.
1 The Recession Hurt Americans’ Retirement Accounts More Than Anybody Knew – theatlantic.com, by Teresa Ghilarducci, 10/16/15, http://www.theatlantic.com/business/archive/2015/10/the-recession-hurt-americans-retirement-accounts-more-than-everyone-thought/410791/.
2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
Author: Meredith Manz