How Long Will It Take Your Nest Egg to Recover?

Workers fears are worse than the reality


Most Americans aren’t expecting their retirement accounts to recover the losses of the past year any time soon. The majority of workers think it will take 4 or more years to recoup market declines or that their 401(k) will never recover, according to a telephone survey of 1,000 adults conducted in April by Opinion Research Corporation and Edward Jones. Respondents say they expect their retirement savings to recover the losses of the past year:

  • By 2010 (4 percent)
  • Within 2 or 3 years (16 percent)
  • In 4 or 5 years (16 percent)
  • In 6 or more years (24 percent)
  • Never (10 percent)
  • Are not saving for retirement (23 percent)
  • Don’t know (7 percent)
  • Source: Opinion Research Corporation and Edward Jones, 2009.

    Those with a higher incomes generally thought it would take longer to recover retirement savings than lower earners.

    Interestingly, retirement experts who have calculated how long it will take to recoup 2008 losses put the figure much lower. The human resources consulting firm Hewitt Associates calculated in March that a 40-year-old with a 401(k) savings rate of 7 percent must work one more year or save an additional 1 percent of pay per year until age 65 to recoup 2008 market losses. For a 55-year-old employee with a 401(k) savings rate averaging 10 percent of pay, Hewitt Associates says he or she will need to save an additional 12 percent of earnings each year until age 65, or work for two more years. Job tenure also matters. The Employee Benefit Research Institute calculated in December that employees on the job between 20 and 29 years will have to work an extra 1 year and 9 months to regain their former retirement account balances. That’s not nearly as bad as many employee fears expressed in this survey.