Battling Your Way Back From Stock Market Losses
By: Lynn O'Shaughnessy, Tim Smart, Dan Moreau, Stan Hinden and Ellen Hoffman Source: AARP Bulletin Today Date Posted: October 2003
- With less time than others to recoup their losses, older Americans are feeling the impact most. To see how they are responding, the AARP Bulletin asked reporters to survey the situation across the country. Here is what they found:
They're battered and bruised by their losses. Some are enraged by corporate shenanigans, some mad at themselves for having taken too much risk and all are concerned.
Yet the AARP Bulletin found older Americans quietly confident that things will get better. And it found that people are not simply waiting for that time to arrive but are battling back.
"You do what you have to do," says John Aska, 59, a facility services executive from West Bloomfield, Mich., whose stock market losses have pushed back his retirement date at least two years. "We are not banging our heads against the wall or anything."
Everywhere people are tightening belts, re-examining work and retirement plans, eyeing their homes as a possible fallback and scrambling to make their savings more secure.
Here, emerging from almost two dozen interviews, are some of the steps they're taking:
Staying on the Job
Even before the stock market fell, Americans were tending to stay in the workforce longer. But Sara Rix, AARP senior policy adviser, says the trend may be accelerating. She points to Labor Department statistics that show the number of workers 55 or older increased 1.2 million in the year ending in June—a far bigger jump than in prior years.
Stuart Dim, 66, and his wife, Joan, 61, of Brooklyn, N.Y., can relate to the trend. The couple, both university executives, have decided to postpone their retirements at least a year as a result of stock market losses.
"I was a poor kid from the Lower East Side of New York, and when the market was going up, I felt wealthy," Stuart says. But not any more. Now he says he's "much more concerned about my savings than I ever was."
Jane Perzyk, 64, of St. Clair Shores, Mich., has continued to work part time as a parochial school librarian because she enjoys it and finds it "energizing." But with her investments down about a third from their peak, she says, "Now I have two reasons to work."
Chucking Retirement
For many others already retired, work beckons again.
When Jack Knox's company moved five years ago, the government relations specialist from Columbia, Md., then 60, thought he'd take some time off before seeking a new job. But when the stock market kept climbing, he concluded he really didn't have to go back to work.
"At the market's peak, I thought I'd have enough money for the rest of my life," he says. The downturn, however, has scotched that.
"I'm not impoverished," he says, "but the numbers are just not working out." As a result, he's begun taking courses leading to a job in real estate. His big regret is that working for pay will cut into his heavy schedule of volunteer activity.
It is a situation in which Susan Walter, 59, of Shepherdstown, W. Va., also finds herself. After her husband and mother died last year, she inherited enough money, she believed, so that by scaling down her spending, she could "do the things I am passionate about that nobody is going to pay you to do: advocacy on environmental issues and for low-income families and children."
But today, after seeing her portfolio cut by about a third, she says, "I have been tentatively putting the word out, getting myself used to the reality … that I need to give up my volunteer efforts and start focusing on earning a living."
Finding a Haven in Your Home
Since nearly 80 percent of people 50 or older own their own homes, home equity represents a vast reserve of personal wealth.
Mary Ann Van der Heyden, 69, of St. Louis, Mo., is well aware of this. The widow of a newspaper pressman, she has a nest egg of mutual funds that supplements her Social Security and pension checks. But as she's watched it lose value, she's decided that, if things get too tough, she can draw down on the equity in her $92,000 home.
Similarly, the Dabbs family of Carlsbad, Calif., which has suffered significant stock losses, takes comfort in knowing their home is an asset they can tap. Since moving into the house in 1997, says Kathleen Dabbs, 58, a former human resources director who works part time in a gift shop, its value has doubled. And she and her husband, Bill, 64, figure that if they have to, they could take out a reverse mortgage on it. In addition, they recently refinanced their house to take advantage of lower interest rates.
Living with Less
Eating hamburger instead of steak—at home, not in a restaurant. Borrowing books from the library instead of buying them. Canceling or scaling down vacations. In these and thousands of other ways, older Americans are economizing.
Since Robert Blanton, 67, and his wife, Garrie, 66, retired in 2000, they've seen their retirement investments drop by more than 25 percent. To plug the gap, the Waynesboro, Va., couple has stopped withdrawing the $1,500 they used to take from their investments each month.
"We don't need it," Blanton, a former quality control manager, says. "We can live modestly on Social Security and pensions without it." They've also shelved plans to add a sunroom onto their house.
Don Kelley, 69, a retired electrical engineer in Florissant, Mo., estimates that the market downturn has lopped a hefty 50 percent off the retirement kitty he and his wife, Pat, 65, a retired teacher, had accumulated.In trimming costs, they've had to reduce the money they were giving to their three children to help with the rearing of their 11 grandchildren. Kelley laments the cutback. "But," he says, "that's the way the cookie crumbles."
Rebuilding Investment Portfolios
The Bulletin found people pursuing a multitude of strategies.
Expressing a common sentiment, Janice Tobolski, 54, says that after many sleepless nights, she and her husband, Joe, 52, concluded "our risk tolerance is much lower than we thought."
In the 1990s, the couple invested so successfully in high-flying tech stocks that they were able to retire two years ago from jobs as toy designers at Fisher-Price Corp. in East Aurora, N.Y. Wisely sensing that the Internet bubble was about to burst, they sold off most of their holdings in April 2000. But unwisely (as they now see it), they decided that fall to reinvest heavily in tech stocks.
Since then the value of their portfolio has been cut nearly in half, and they have transferred three-fourths of their money to cash accounts. At the moment, Janice says, "We're in a holding pattern." She says that while they have not ruled out new investments in stocks, she is also weighing a return to a dressmaking business she once operated.
The market's poor performance has driven Linda Wilcox, 55, of Atlanta entirely to the sidelines. When this owner of a fledgling antiques business sensed market instability in early 2000, she sold all her stock and put every penny in bonds. Since then, she has retreated from risk even more, moving everything to money market funds.
In contrast, John Aska, the Michigan man whose investment losses will keep him on the job longer, believes so strongly in the market that he and his wife, Sharon, remain fully invested in stocks.
"At my age," says John, "I still have a 20-year horizon at least," and over that time he continues to believe stocks will perform best.
Freelance writers Lynn O'Shaughnessy, Tim Smart, Dan Moreau, Stan Hinden and Ellen Hoffman contributed to this article.
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