Recessions, Reeling Markets, and Retiree Well-Being

40 Pages Posted: 14 Jun 2010

See all articles by Courtney Coile

Courtney Coile

Wellesley College; National Bureau of Economic Research (NBER)

Phillip B. Levine

Wellesley College; National Bureau of Economic Research (NBER)

Date Written: June 2010

Abstract

This paper examines the impact of late-career investment returns and job loss on subsequent retiree well-being. Specifically, we explore whether there is a link between the income of retirees aged 70 to 79 and the stock market and labor market conditions that existed around the time of their retirement. We use data from the 2000 Census and the 2001 through 2007 American Community Surveys and consider both total personal income and income by type. We find that a long-term decline in the stock market in the years leading up to retirement leads to a modest reduction in investment income a decade or so later for those in the top third of the income distribution. The consequences of approaching retirement when the labor market is weak are more severe. A higher unemployment rate around the time of retirement reduces Social Security income for those in the bottom two-thirds of the income distribution; we estimate that an unemployed worker experiences a roughly 20 percent drop in Social Security income, consistent with claiming benefits several years early. Overall, our results indicate the importance of the challenges faced by lower-income workers who face a weak labor market as they approach retirement.

Suggested Citation

Coile, Courtney and Levine, Phillip B., Recessions, Reeling Markets, and Retiree Well-Being (June 2010). NBER Working Paper No. w16066. Available at SSRN: https://ssrn.com/abstract=1624107

Courtney Coile (Contact Author)

Wellesley College ( email )

106 Central Street
Wellesley, MA 02181
United States
781-283-2408 (Phone)
781-283-2177 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Phillip B. Levine

Wellesley College ( email )

106 Central Street
Wellesley, MA 02181
United States
781-283-2162 (Phone)
781-283-2177 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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