During the 2007-09 Great Recession, the American economic environment was bleak: unemployment roughly doubled, median household incomes fell 5 per cent, average household net worth declined by a third, and consumer spending dropped markedly. Each month, the Bureau of Labor Statistics reported massive lay-offs, disappointing job creation numbers, and a dismal outlook for future job growth. The literature studying the impact of the Great Recession on American households finds that those nearing retirement age were particularly hard hit. For example, using data from the American Life Panel, Hurd and Rohwedder (2010) find that 25 per cent of respondents aged 50-59 lost at least 35 per cent of their retirement savings, and many took early retirement due to unemployment. Chakrabarti et al. (2015) corroborate these findings using data from credit report records and various household surveys. Using asset and labour market data from the Health and Retirement Study, Gustman et al. (2012) find that those approaching retirement age during the Great Recession lost retirement wealth, whereas older cohorts gained retirement wealth when they had approached retirement age prior to the Great Recession.

We explore the effects of the Great Recession on the SWB of adult working-age Americans and conduct various analyses to examine whether those approaching retirement age were more adversely impacted. 1 We use a difference-in-differences (DD) approach, comparing the change in pre- to post-recession SWB of those approaching retirement age to younger working-age adults. For younger working-age adults, we find no difference in their pre-to post-recession SWB. In contrast, we find that the post-recession SWB of those approaching retirement age was significantly lower than prerecession. We explore channels through which the Great Recession may have differentially impacted the SWB of those approaching retirement age and find evidence suggestive of wealth effects. The result and mechanism are specific to a context in which the institution of retirement is the norm and is funded with personal wealth; this is increasingly relevant as countries develop economically, and older adults become less likely to finance consumption with labour income.