As if the news about the looming Social Security crisis wasn't bad enough, a new study says the Great Recession may have permanently reduced future retirees' incomes by an average of $2,300 a year.
Somewhat surprisingly it's not the nation's high unemployment rate that receives the brunt of the blame. Instead, it's the widespread slowdown in wage growth, which many economists predict will become permanent, that's having the biggest impact on our golden years' finances, according to the study.
"Wage stagnation will have serious long-term consequences if wages resume growing at their pre-recession rate since they will never make up the ground lost during the recession," said the report, which was released by Boston College's Center for Retirement Research.
Some highlights of the study:
- Workers between the ages of 25 and 34 in 2008 (the height of the recession) will see an average drop of 4.9 percent in retirement income after age 70 — a hit to their pocketbooks of roughly $3,000 a year. Furthermore, the slowdown in wage growth will accumulate over their entire careers.
- Those between the ages of 55 to 64 in 2008 will see a 4.1 percent drop in retirement income, primarily in the form of lower Social Security benefits. This problem is compounded by the fact that many older workers who lost their jobs during the recession were forced into early retirement.
- Future retirement income will fall the most for those with the highest incomes. Among the youngest age group, for example, those in the top 20 percent income bracket will lose $7,500 annually, while those in the bottom group will lose only $400 a year.
- The decline in household income will increase the number of Americans living on limited incomes at age 70. Among people between the ages of 25 to 64 in 2008, the share with incomes below 125 percent of the federal poverty level at age 70 will increase 7.4 percent. That translates into an additional 711,000 adults living in or near poverty.