The morbid joke about the Great Recession was that it turned Americans’ 401(k)s into 201(k)s. Indeed, the nation’s 401(k)s and IRAs lost about $2.4 trillion in the final two quarters of 2008, and the average loss that year for workers who had been on the job for 20 years was, according to one estimate, about 25 percent. Since then, headlines have been telling a much cheerier story: The S&P 500 was up 54 percent between early 2009 and late 2011, and GDP increased by 10 percent during the same time period. These recoveries were seen as a sign that retirement balances were, on the whole, on the upswing again.
That story might be incomplete. I have, along with Joelle Saad-Lessler, a colleague of mine at The New School for Social Research, used data from the federal government to take a closer look at the performances of the retirement accounts of male and female workers who were between the ages of 51 and 59 in 2009. We looked at this group because, being near the end of their careers, they were presumably some of the most motivated savers.
We thought that this group of people would be relatively able to come back from the crash, but we found that the averages, as they often do, have hid some of the substantial differences between individual workers. These averages distorted the risks people are exposed to when their retirement accounts are tied to volatile financial markets, depend on employer contributions, and require people to maintain or increase their contributions themselves.