Excerpted from cnbc.com, “Market Meltdown Amplifies Baby Boomer Worries”, 03 Mar 2009
If losing one’s job weren’t enough to worry about in this recession, for many Americans there’s the added angst of being able to afford one’s retirement.
And that may help explain why the seemingly relentless declines in home and stock prices have ravaged consumer confidence.
The depth of that damage … household wealth in the fourth quarter, … was some 12 percent below what it was during its peak in the third quarter of 2007. The decline in wealth is the greatest on record.
Thus far, the median price of a home is down more than 20 percent from $219,000 at the market peak in 2007 to $170,000 in January.
Stock prices, however, have fallen twice as much, some 50 percent, from their October 2007 peak.
And while a greater percentage of Americans are homeowners than investors and thus the average household’s wealth is more defined by real estate than investments, the investment outlook is still a major force.
In 2008, 47 percent of all households, or some 54.5 million, participated in the market through equity or bond ownership .., 65 million.people participate in defined contribution (DC) retirement savings plans, such as 401(k)s.
The value of those holdings has shrunk considerable. Americans held $15.9 trillion in retirement assets at the end of the third quarter of 2008, accounting for 35 percent of all household financial assets.
At the end of the second quarter of 2007, right before the credit crunch first bit, the value of those holdings was $17.4 trillion.
In the current environment, the huge losses in the stock market may actually have a larger psychological effect than those of the housing market because of the more frequent reminders; the declines are measured daily and weekly, not just monthly, like housing.
While major stock market indices are at 12-year lows; existing single family home prices are a mere six-year low.
“Economic advisors are worried about the stock market because it is part of the puzzle, and it’s almost as if the politicians don’t care what the stock market is doing,”
Some say the President’s stated desire to raise the tax on dividends and capital gains from 15 to 20 percent … sent a negative message to Wall Street, even if it was consistent with his campaign comments.
What’s more, a higher capital gains rate may not pay off if investors continue to lose money because stock prices head ever lower.
Economists don’t expect the President to identify with investors the way he does with homeowners …
Full article:
http://www.cnbc.com/id/29471950
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