Will the Financial Fragility of Retirees Increase?
7 Pages Posted: 6 Nov 2019
Date Written: October 1, 2018
Retirees have long been considered financially fragile. The notion that they are ill-equipped to absorb financial shocks is captured in the traditional trope that they live on fixed incomes. Going forward, retirees will get much less income from fixed Social Security and employer pensions, and much more from savings in 401(k) plans and individual retirement accounts (IRAs). These savings give retirees greater flexibility to respond to shocks. But tapping into their nest eggs comes at the cost of having fewer resources to cover ongoing expenses. The increased dependence on financial assets also introduces new sources of risk—that households accumulate too little over their working years or draw down their savings too quickly in retirement, and their finances increasingly are exposed to financial market downturns. To the extent these changes increase the financial fragility of retirees, they create new challenges that must be addressed.
Keywords: Retirement Planning
JEL Classification: G10, G11
Suggested Citation: Suggested Citation