Some older workers are rethinking retirement
The weak economy is forcing older workers to rethink their retirement.
Neal Ator and his wife, Paula, take time out on the front porch of their McKinney home. Mr. Ator supplements his retirement by selling reverse mortgages,
and Mrs. Ator runs her own business from their home. After watching their nest eggs crack under the weight of falling stock and home prices, some workers who were about to quit the daily grind have put those plans on hold. And some retirees have even returned to work.
"They've crunched the numbers and concluded they can't head to the lake after a 20 percent loss in their net worth," said Monique Morrissey, an economist at the Economic Policy In
stitute. "Now is no time to pick leisure over labor."
Scott Daily of Carrollton was looking forward to spending more time tinkering with cars, but the weak economy has forced him to postpone his retirement plans. A recent survey by AARP found that one in five workers ages 55 to 64 intends to delay retirement because of the economic downturn. Most blame stock market losses, while others cite declining home values.
And only 18 percent of workers and 29 percent of retirees now feel very confident about having enough money for a comfortable retirement – the smallest percentages in at least a decade, according to the Employee Benefit Research Institute.
Neal Ator retired in September and began collecting Social Security in December.
But the 65-year-old McKinney resident has since taken a part-time job as a loan officer to supplement his retirement income.
Drawing on his experience as a credit counselor, he sells reverse mortgages out of his home. He hopes the paycheck will offset the losses from his investments and pay for some travel with his wife.
"Many of my neighbors have also come out of retirement," Mr. Ator said. "Besides the satisfaction we get fr
om our jobs, we're all trying to make sure our nest eggs last as long as we do."
The ups and downs of the market will play an even bigger role in retirement decisions as workers depend less on traditional fixed-benefit pensions and more on 401(k)s and individual retirement accounts, experts say.
"This is just the beginning of a long-term trend. The changing nature of retirement income will make boomers more and more vulnerable to market downturns," said Richard Johnson, an economist with the Urban Institute.
Employers' decisions to scale back or drop retiree health benefits, coupled with rising health care costs, have also compelled workers to remain on the job at least until they qualify for Medicare at 65, he said.
'Stress test'
Scott Daily of Carrollton figured he had had enough of the corporate world last year after going through his fourth downsizing. He was looking forward to kicking back, riding his motorcycle and tinkering with old cars.
The weak economy is forcing older workers to rethink their retirement.
Neal Ator and his wife, Paula, take time out on the front porch of their McKinney home. Mr. Ator supplements his retirement by selling reverse mortgages,
and Mrs. Ator runs her own business from their home. After watching their nest eggs crack under the weight of falling stock and home prices, some workers who were about to quit the daily grind have put those plans on hold. And some retirees have even returned to work."They've crunched the numbers and concluded they can't head to the lake after a 20 percent loss in their net worth," said Monique Morrissey, an economist at the Economic Policy In
stitute. "Now is no time to pick leisure over labor."Scott Daily of Carrollton was looking forward to spending more time tinkering with cars, but the weak economy has forced him to postpone his retirement plans. A recent survey by AARP found that one in five workers ages 55 to 64 intends to delay retirement because of the economic downturn. Most blame stock market losses, while others cite declining home values.
And only 18 percent of workers and 29 percent of retirees now feel very confident about having enough money for a comfortable retirement – the smallest percentages in at least a decade, according to the Employee Benefit Research Institute.
Neal Ator retired in September and began collecting Social Security in December.
But the 65-year-old McKinney resident has since taken a part-time job as a loan officer to supplement his retirement income.
Drawing on his experience as a credit counselor, he sells reverse mortgages out of his home. He hopes the paycheck will offset the losses from his investments and pay for some travel with his wife.
"Many of my neighbors have also come out of retirement," Mr. Ator said. "Besides the satisfaction we get fr
om our jobs, we're all trying to make sure our nest eggs last as long as we do."The ups and downs of the market will play an even bigger role in retirement decisions as workers depend less on traditional fixed-benefit pensions and more on 401(k)s and individual retirement accounts, experts say.
"This is just the beginning of a long-term trend. The changing nature of retirement income will make boomers more and more vulnerable to market downturns," said Richard Johnson, an economist with the Urban Institute.
Employers' decisions to scale back or drop retiree health benefits, coupled with rising health care costs, have also compelled workers to remain on the job at least until they qualify for Medicare at 65, he said.
'Stress test'
Scott Daily of Carrollton figured he had had enough of the corporate world last year after going through his fourth downsizing. He was looking forward to kicking back, riding his motorcycle and tinkering with old cars.
"I talked to my financial planner, who thought I could afford to do those things, even though I'm only 60," he said. "I'm debt-free – I don't even have a mortgage. And I've been able to save for my retirement."
Then the market took a nosedive, slashing 30 percent from Mr. Daily's portfolio and sending him in search of a job again.
"I'm not hurting, but I'm wondering whether the economy will deteriorate further," he said.
Over his career, Mr. Daily managed dozens of construction projects across the country, traveling more than 3 million miles. He's now trying to find an employer who values that hands-on experience.
Gary Brownfield, a certified financial planner with GB Financial Services in Plano, said he often gives his older clients a "financial stress test."
"We look at what would happen to their nest egg if the market collapsed the day after they retired," he said. "Then we see whether they'd have enough time to recover and enough money to live on throughout retirement."
The exercise sometimes convinces his clients that they need to continue working and add muscle to their portfolio, Mr. Brownfield said.
Many people make the mistake of overestimating
what they can afford to withdraw from their nest egg and underestimating inflation's effect, said Viktor Szucs, a certified financial planner at Quest Capital Management in Dallas.
"Anyone who withdraws too much in a bear market, especially early in retirement, will outlive his money," Mr. Szucs said. "A good rule is to take out no more than 4 percent a year. That should keep a portfolio going for many years."
The past decade of tame inflation also lulled older adults into thinking that they didn't have to worry about their dwindling purchasing power, he said, but today's high gas and food prices have jolted them back to reality.
Extra income
Peter Laux, who's 65 and lives in Plano, works as a management consultant four days a week because he believes he can't afford to take much from his shrunken nest egg,
which has lost 20 percent in a year.
"If the market were better, I wouldn't work at all," he said. "But my cardiologist tells me I may live to be 95, and my mutual funds certainly aren't giving me the kind of returns I'll need to last that long."
Mr. Laux, who took an early retirement package from Texas Instruments Inc., intends to draw Social Security when he reaches 66. But his consulting income lets him enjoy a more comfortable lifestyle.
"Because I don't see myself sitting at home and eating cat food, I will keep chasing consulting jobs," he said.
Depressed housing prices have also shaken older workers' confidence in retirement, Mr. Szucs said, since some boomers had figured they'd sell their homes, downs
ize and use the profits in retirement.
"Even those who don't plan to move after retirement are still psychologically affected by falling home values," he said. "They look at their net worth on paper and feel poorer, so they continue working."
But the topsy-turvy housing market may also allow a few people to realize their retirement dreams sooner than they had expected, Mr. Szucs said.
"Dallas has fared better than most housing markets, so clients of mine who had wanted to move to California or Florida but been priced out of those once-booming markets can now afford a place on the beach," he said.
"It's the one silver lining."
08:03 AM CDT on Tuesday, August 12, 2008"Anyone who withdraws too much in a bear market, especially early in retirement, will outlive his money," Mr. Szucs said. "A good rule is to take out no more than 4 percent a year. That should keep a portfolio going for many years."
The past decade of tame inflation also lulled older adults into thinking that they didn't have to worry about their dwindling purchasing power, he said, but today's high gas and food prices have jolted them back to reality.
Extra income
Peter Laux, who's 65 and lives in Plano, works as a management consultant four days a week because he believes he can't afford to take much from his shrunken nest egg,
which has lost 20 percent in a year."If the market were better, I wouldn't work at all," he said. "But my cardiologist tells me I may live to be 95, and my mutual funds certainly aren't giving me the kind of returns I'll need to last that long."
Mr. Laux, who took an early retirement package from Texas Instruments Inc., intends to draw Social Security when he reaches 66. But his consulting income lets him enjoy a more comfortable lifestyle.
"Because I don't see myself sitting at home and eating cat food, I will keep chasing consulting jobs," he said.
Depressed housing prices have also shaken older workers' confidence in retirement, Mr. Szucs said, since some boomers had figured they'd sell their homes, downs
ize and use the profits in retirement."Even those who don't plan to move after retirement are still psychologically affected by falling home values," he said. "They look at their net worth on paper and feel poorer, so they continue working."
But the topsy-turvy housing market may also allow a few people to realize their retirement dreams sooner than they had expected, Mr. Szucs said.
"Dallas has fared better than most housing markets, so clients of mine who had wanted to move to California or Florida but been priced out of those once-booming markets can now afford a place on the beach," he said.
"It's the one silver lining."
By BOB MOOS / The Dallas Morning News
bmoos@dallasnews.com
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