Retirement security lags stock, home value surge

Mitch Strohm

You'd at least hope that Wall Street's record year and an improving housing market would give retirement security a significant boost.

Regrettably, that's not the case, according to a new report from the Center for Retirement Research at Boston College.

The center analyzed how higher stock prices and home values affect the National Retirement Risk Index (NRRI), which measures the share of working-age American households that will probably lack the resources needed to maintain their standard of living in retirement.

It found that 50% of American households are at risk, down just slightly from 53% last year.

Why such a small improvement?

Since 2010, adjusting for inflation, the stock market has increased 45%, according to the report.

But 89% of all equities are owned by the highest-earning households — those who are in the top third of all income.

As a result, almost all of the wealth generated by record-high stock prices fell to the most affluent households. The majority of families missed out.

Housing prices have posted double-digit increases in some cities. But nationwide, property values have only increased about 6% since 2010, the Center for Retirement Research says.

That's disappointing for all of those middle-income families whose biggest asset is their home.

As a result, the center found a pretty small change in retirement risk.

Households in the bottom two-thirds of the country in terms of earnings — low-income and middle-income families — saw the smallest improvement.

Here's a chart of retirement risk level by year and income group at age 65:

at_risk_retirement_2013_

As you can see, the retirement picture is still worse than it was in 2007, before the financial crisis and subsequent recession.

Record-low returns on investments such as CDs and the increase in Social Security's full retirement age are also contributing to the insecurity facing middle- and low-income households, which are more heavily dependent on Social Security.

But what's scary is that these are very conservative estimates.

"The only way out of this box is for people to save more and/or work longer," notes the report.