Investing
AARP Finds Continuing Hangover from Earlier Stock Decline
News Release
February 18, 2004
Despite 2003 Market Rebound, 50 + Americans Still Cautious
A new AARP survey of investors shows a continuing hangover from the three-year market swoon that began in 2000.
Despite last year's rebound in the stock market, many Americans 50 and over report continuing investment losses, and some – about one in five – acknowledge a dampening impact on their plans and lifestyle.
However, the survey, conducted last November and December for the 2004 AARP Quality of Life Index, found far fewer 50 and over shareholders (30 percent) reporting losses in 2003 than had reported losses in a December, 2002 AARP survey (77 percent).
The 20-indicator Quality of Life Index showed that over the past decade, life for boomers and their parents has generally improved, but that some striking vulnerabilities remain. AARP plans to update the quality of life index annually.
The survey of nine hundred 50+ Americans found that, in the past year, 20 percent said that they had cut back on entertainment, and 22 percent, on vacations. More than six percent said they had cut back on their expenditures for health care, prescriptions, or health insurance.
The new survey also found that 60 percent of those 50 and older owned stocks, and that 30 percent of them had losses in the previous year. Of those already retired, one-fifth expected less retirement income due to the market's performance and some of those who experienced losses even considered returning to work (13 percent). In both cases the percentages were significantly higher among 50-64 year-olds than among those 65+. The 50-64 year-olds were more likely to expect reduced retirement income (29 percent to 17percent) and much more likely to consider returning to work (25 percent to 8 percent) if they had market losses than those 65+.
While financially troubling, this is still better than the 2002 AARP survey that showed that two-thirds (67 percent) said stock losses had a sobering effect on their lifestyles. In that study, a majority (59 percent) said that they budgeted more carefully, 34 percent said that they were taking fewer vacations, and 30 percent had postponed making a major purchase.
"The findings regarding the market effects are consistent with the general findings of the Quality of Life Index that life has improved for 50+ Americans, but that they remain vulnerable," said John Gist, associate director of AARP's Public Policy Institute.
"They also illustrate the importance of Social Security, earnings and long-term pension protection as hedges against market fluctuations for those nearing retirement. Extending work life is an important way to offset low retirement savings," Gist added.
Some of the other key findings of the report include:
- In 2003, 21 percent of those working said they had decided in the last 12 months to retire later (five percent said they had decided to retire earlier). In 2002, the figure was 20 percent for later retirement.
- Low interest rates on assets, combined with low equity returns, were a "double whammy" that depleted the retirement nest eggs of both those retired and those nearing retirement. Thirty percent of respondents who had interest-earning assets said that they earned less than two percent on their interest-bearing accounts.
- Overall, 13 percent of all those surveyed said they were taking on less risk than before in their investment practices. But of those who had suffered losses, one-fifth was taking less risk to reduce potential losses.
- More than one-fifth (23 percent) of respondents who are still working and experienced market losses said that they had increased the amount they contributed to their 401(k) plan.
AARP is a nonprofit, nonpartisan membership organization dedicated to making life better for people 50 and over. We provide information and resources; engage in legislative, regulatory and legal advocacy; assist members in serving their communities; and offer a wide range of unique benefits, special products, and services for our members. These include AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our quarterly publication for Hispanic members; NRTA Live and Learn for National Retired Teachers Association members; and our Web site, www.aarp.org. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.