A significant majority of retirement plan participants identify their risk tolerance as either moderate or conservative.
The 2008 economic collapse and subsequent recession was an epochal event considered to be the country’s worst financial crisis since the Great Depression. According to Federal Reserve estimates, it cost the country $14 trillion, almost an entire year’s worth of economic activity. It is not surprising, then, that affluent investors would cite that year as their most difficult financially. It was especially difficult for retirement plan participants, according to a recent Spectrem Group study.
The highest percentage (17 percent) called 2008 their most difficult year financially, followed by 2009 (12 percent).
The economic tumult of 2008 and 2009 was anathematic to the retirement plan participant mindset. A significant majority of plan participants (69 percent) rank their risk tolerance as either moderate (54 percent) or conservative (15 percent). A majority (54 percent) prefer a guaranteed rate of return for the majority of investments, the Spectrem Group study finds. Less than half (46 percent) would be willing to take a significant investment risk on only a portion of their investments to earn a higher return.
A five-years-after study conducted by Pew Research found two-thirds of Americans believe the nation’s economic system was no more secure than it was before the market crash triggered by Lehman Brothers’ bankruptcy. One-third of those surveyed reported that the recession had a major impact on them and that their finances had not yet recovered.
The next highest percentage of retirement plan participants (9 percent) said that 2000 was their most difficult year financially. In March of that year, the dotcom bubble burst. As Time magazine recently recalled, “Stocks sunk. Companies folded. Fortunes were lost, and the American economy started to slip down a slow mudslide that would end up in full-on recession.”
As America has struggled to recover from 2008 collapse, less than 10 percent of plan participants said they would rank any of the last five years as their most difficult financially, although since 2012, concern has ticked upward, from 6 percent to 8 percent who would rank last year as their most financially difficult.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.