CENTER FOR ECONOMIC AND POLICY RESEARCH Press Release __________________________________________
Baby Boomers Face Massive Loss of Retirement Wealth Due to Housing Market Meltdown: Plummeting house prices will leave millions of homeowners dependent on Social Security in their retirement For Immediate Release: June 24, 2008 Contact: Alan Barber, (202) 293-5380 x 115 WASHINGTON, DC- Former GAO Comptroller General David Walker testified today before the House Budget Committee about a proposed commission to cut Social Security and Medicare for future retirees. However, as Congress debates this issue, they must take into account the financial situation of near retirees. A new report from the Center for Economic and Policy Research (CEPR) [www.cepr.net/] shows that, due to the collapse of the housing bubble, the vast majority of near retirees have accumulated little or no wealth. This means that they will be almost completely reliant on Social Security and Medicare to support them in their retirement years. The study, "The Housing Crash and the Retirement Prospects of Late Baby Boomers," analyzed the wealth holdings of families headed by people between the ages of 45 and 54 in 2004 and projected the wealth of these families in 2009. [http://www.cepr.net/index.php/publications/reports/the-housing-crash-and-the-retirement-prospects-of-late-baby-boomers/] The findings are presented by income quintile under three scenarios- real house prices remain at current levels, real house prices fall by 10 percent, or real house prices fall by 20 percent. In all three scenarios, the vast majority of these families will have little or no housing wealth in 2009. "This extraordinary destruction of wealth will have tremendous implications for millions of families as they enter retirement," said report co-author Dean Baker. [http://www.cepr.net/www.cepr.net/index.php?option=com_content&task=view&id=80&Itemid=80] "Coupled with a very low personal savings rate, this means that many people will only have Social Security and Medicare to rely on in their retirement. The report projects that if house prices were to stay the same through 2009, the median household would have 24.7 percent less wealth than the median household in this age group in 2004. [http://www.cepr.net/index.php/publications/reports/the-housing-crash-and-the-retirement-prospects-of-late-baby-boomers/] If real house prices fall 10 percent, the median household would see a 34.6 percent loss in wealth compared with the median in 2004 and a 45.6 percent falloff if prices fall by 20 percent. For those who rent their homes, however, the outlook is not as bleak. In fact, the renters within each wealth quintile in 2004 will have more wealth in 2009 under all three scenarios, than will the homeowners from the same quintile. These projections underscore the dramatic impact of policies that promoted homeownership during the housing bubble. This analysis should also prompt serious re-examination of policy proposals to cut Social Security and Medicare for near retirees. Baker commented, "policies that perhaps could have been justified at the peak of the housing bubble make much less sense now that tens of millions of near-retirees have just seen most of their wealth disappear." In analyzing wealth holdings for these families, the authors used data from the Federal Reserve Board's 2004 Survey of Consumer Finance. The authors also used the S&P 500 and the Case-Shiller 20-city Composite Index to adjust for equity values and home price changes between 2004 and 2009. ### Center for Economic and Policy Research, 1611 Connecticut Ave, NW, Suite 400, Washington, DC 20009 Phone: (202) 293-5380, Fax: (202) 588-1356, Home: www.cepr.net _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
