Retirement crunch has not cracked past retirees' nest eggs

A new analysis shows how previous generations were more able to prepare for their sunset years

Retirement crunch has not cracked past retirees' nest eggs
Whether you’re talking about stocks, bonds, or mutual funds, it’s all the same: past performance does not indicate future returns. And as it turns out, a similar argument can be made for retirement plans.

Analysis from the BlackRock Retirement Institute has found that retirees that left the workplace starting in the early ‘90s have managed to preserve the vast majority of their savings throughout retirement, reported BenefitsPro.

Looking at data from the Employee Benefit Research Institute (EBRI), BlackRock found that the wealthiest households still held 83% of their savings nearly 20 years after they retired. Those in the median wealth bracket retained 77%, while those in the lowest wealth bracket held 80%.

That may be good news for the old guard, but soon-to-be retirees may not be so lucky. “For those close to retirement today, the environment is going to be dramatically different,” Bruce Wolfe, executive director of BlackRock’s Retirement Institute, told BenefitsPro.

According to Wolfe, those who retired in the early ‘90s faced more favourable conditions in their earning years. In the ‘70s and ‘80s, when they were at their peak earning potential, defined-benefit plans were fairly common; some 42% of the retirees examined in BlackRock’s survey had pension income.

At the median wealth category, which had total assets of around US$330,000 at retirement, 33% of people’s retirement income came from pensions. At the lowest and highest wealth levels, pensions made up 20% and 15% of retirement income, respectively.

The pension outlook is worse for employees going forward. According to EBRI data, only 2% of private-sector workers were saving solely through a defined-benefit plan in 2014.

“The point we are trying to make is that looking back at the spending patterns of past retirees is probably not the best way to think about the retirement landscape going forward,” Wolfe said.

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