RETIREES IN PERIL: HOW THEY HOPE TO COPE

Notes:

From Atlanta, GA. to Las Vegas, NV and back east to Florida, retirees, and the almost-retired across the country are taking the current financial mess on the chin.

With their bank savings dwindling and CD rates declining, to fixed-income pensions with less and less buying power, and 401K's and IRA's in stocks that race up and down, day to day, sometime hour to hour, in this volatile market, the retirees, the elderly parents, the grandparents are getting hit the worse.

And, it's the worse, not just because of the losses and effect on the quality of life they worked so hard to have...but because they don't have time to recover the lost money. Nor can many find jobs; and some are unable to work.

Costs for goods and services they need more than the general population, such as for medicine and medical care, assisted living, in-home help, senior living establishments, Medicare Insurance and supplemental insurance rise faster than the rest of goods and services and the general public need.

Increasingly, if they have homes they will turn to reverse mortgages, or if not, then to their families, and for those that are able, to the workplace for help with the so-called "golden years" they have been robbed of. Not for fun, but perhaps in many cases, just for survival.

Here are some of their stories...the kind that really do give you worry wrinkles and grey hair.

Gloria


Retirees ‘going through hell’ with
declining markets, housing crisis
As asset values continue to fall, those 60 or older need bailout plan to work, analysts say

By BOB DART
The Atlanta Journal-Constitution
Thursday, September 25, 2008

WASHINGTON — At the end of working lives where deprivation rarely dwelled, older Americans now worry that they’re teetering at the edge of their own Great Depression.
“Right now, older Americans — those retired or about to retire — are going through hell,” said Alicia H. Munnell, director of the Center for Retirement Research at Boston College. “They’re seeing the value of their 401(k) assets decline and facing risks that assets will go down even more in the future.”

OLDER HOUSEHOLDS TAKE BIG HIT

Equities held by households with members 60 or older

• Value at peak of market, Oct. 9, 2007: $5.12 trillion
• Value on Sept. 23, 2008: $3.94 trillion
• Loss in value: $1.18trillion
• Percentage change: 23 percent
Source: Center for Retirement Research

RELATED:
• No demographic group faces greater financial danger as Congress debates President Bush’s proposed $700 billion bailout of the financial services industry.

People over 60 own nearly half of all equities, and have seen this wealth — and their sense of security — plummet in recent months. Likewise, after paying mortgages for decades and counting on rising home values to help fund their retirements, they’ve been blind-sided by the fall in real-estate prices. And those with fixed incomes from pensions see inflation returning to gobble up their nest eggs.

This age group has matured mostly amid prosperity and knows of the historic hardships of the 1930s only from their parents’ stories. Now, ready to enjoy retirement, they may be asked to help pay higher taxes because of the blunders of financiers.

The fear and resentment of older Americans is evident on the Web site of AARP, the nation’s largest organization for those over 50.

“I’m tired of being treated like sheeple. I don’t trust anybody in authority any more,” complained one writer. “People who were careful, didn’t go into debt, saved and scrimped, are going to be the ones who have to pay for this bailout. They will see the value of their dollars go down and their taxes go up to pay for the recklessness of those we trusted to keep our country strong.”

“I feel AARP needs to urgently address the issue of the proposed bailout!” wrote another. “I feel it will result in massive inflation, and an erosion of all retirees’ standard of living.”

But some economists say older Americans especially need the bailout to succeed — and succeed quickly.

“They need stability in the market,” Munnell explained. “For most, it doesn’t make sense to sell now. The $700 billion so-called bailout seems like the best chance for them to enjoy some security. It certainly seems better than not doing anything.”

Massive wealth held by those over 60

At the end of the third quarter of 2007, U.S. households and nonprofit organizations had almost $10.5 trillion in equities, the Center for Retirement Research calculated from federal data. It estimated that almost half of this was held by people over the age of 60.

Since the broad stock market has fallen by 23 percent since its peak in October 2007, the Center said, Americans over the age of 60 have seen their equity wealth fall by nearly a fourth.

“The bailout could help retirees if it boosts the stock market,” acknowledged Richard Johnson, a principal research associate at the Urban Institute in Washington. “But there are potential down sides. What is unknown is how we’re going to pay for the bailout. Big tax increases in the future would hurt retirees. Paying for the bailout could siphon money from Social Security and Medicare.”

If the massive infusion of federal money sparks more inflation, the rising prices would also land hard on retirees, Johnson said. “There are cost-of-living adjustments for Social Security, but savings are not protected and traditional defined pensions usually don’t have inflation escalators built in.”

In addition to their savings and financial investments, the economic crisis has hit older Americans where they felt most secure — in their home equity .

“It’s one thing for people to be watching on the Internet on an hour-by-hour basis and see equity prices decline. At least they can quantify how much was lost,” said Jack VanDerhei, research director for the Employee Benefit Research Institute.

"It’s quite another thing to hear that the house you thought you were going to sell for half a million dollars to help pay for your retirement is now worth much less — but you don’t know how much less.”

Many people planned on using the appreciation in their paid-for houses to provide up to 50 percent of their retirement funds, he said.

And, especially in an era where many took equity out of their homes to pay children’s college costs and other expenses of middle age, older Americans are not immune to other aspects of the housing crisis.

Many in foreclosure or behind on mortgage payments

The AARP’s Public Policy Institute reported last week that 684,000 Americans older than 50 were either in foreclosure or delinquent in mortgage payments.

“The public perception is that older Americans are financially secure in their homes,” said Susan Reinhard, the institute’s director. “But the reality is that … hundreds of thousands of others are not and face unsettling uncertainty over their futures as homeowners.

“Older Americans depend on their homes both for shelter and as a retirement asset,” she pointed out. “Losing a home jeopardizes long-term financial security. For older Americans it also leaves them with limited time to recover.”

This particular crisis has another insidious aspect — older workers losing their jobs and retirement investments in one swoop, said John Laitner, an economics professor at the University of Michigan and director of the Michigan Retirement Research Center.

Despite warnings to diversity their 401(k) investments, many workers — especially at financial firms — put too much of their money into their own companies, he said.

“If something goes wrong with the company, you can lose your shirt. You can lose the value of your retirement account at the same moment you lose your job. It can really leave those people high and dry,” he said.

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Retirees, and those who’d like to be, worry about investments, expenses
By Amanda Finnegan, Joe Schoenmann, Las Vegas Sun, 9-26-2008

Some of those to be hardest hit by the flood of bad economic news cascading down from Wall Street are retired Las Vegas Valley residents who, even a month ago, might have believed their days of work were behind them.

Now many of them are sitting, waiting and watching as reports of bailouts, buyouts and failings threaten their life savings.

And their plans? They are as varied as the people of the Las Vegas area.

Some are going back to work.
Everyone’s watching his spending.
And some aren’t doing much worrying at all.

“Sure, I’m scared for my investments,” says Don Shreffner, 67, a retired truck driver visiting the Henderson Senior Center on Wednesday afternoon. “All of us have pulled out of the market. We’re all watching it and wondering what’s happened.”

Fixed pensions used to be the gold standard for company retirees, but many employers have switched to 401(k) accounts, whose payments vary with investment results, in recent decades.

That shift has left people such as Larry Dostal, 70, and his wife, Sharon, 63, guessing how Wall Street’s tumult will affect their nearly $300,000 in retirement investments. Some of that money is in a 401(k), but most is invested with American International Group, (AIG) the insurer that became the beneficiary of an $85 billion government bailout.

Right now, as a whole, it’s still OK, but I’m sure we will feel it later,” says Dostal, a retired financial manager who worked 35 years for the same company. He now works about 12 hours a week at Henderson’s Multigenerational Center. His wife, a nurse, had planned on retiring in a few years.

“But now we’re not so sure she’ll be able to,” Dostal says.

Perhaps with good reason. People who were counting on their investments to see them through retirement are in trouble.

“And it is likely that older Americans are among the most at risk, especially those who got aggressive with their investment portfolios,” Jeremy Aguero, principal analyst with Applied Analysis, a finance and economics consulting company, says.

The risk is exacerbated because people are living longer — and are counting on the fruits of their investments to sustain them longer than earlier generations.

This is the first generation that truly faces a crisis, versus those in the past who didn’t live long beyond their retirements,” says Hugh Anderson, vice president of ABD&F Group at Merrill Lynch and Las Vegas Chamber of Commerce government affairs chairman.

“The reality is that individuals, especially those who are already retired, recognize that there’s no additional income streams coming in while the purchasing ability of their dollar seems to shrink,” Anderson says. Anderson generally recommends that those with investment plans reexamine them, and those without plans “develop one to best minimize volatility.”

The key, he adds, “is to avoid getting caught up in the daily noise and recognize that the world is not going to come to an end. “I remind myself, and my clients, that I look out my window and cars are driving by and local businesses have cars in their lots. Things are muted, but they are not zero.”

That’s about how Gary Herndon, 58, who retired from the life insurance business three years ago, sees it. “If you look back over the last 70 years, you see these things happen and it takes the stock market about three to five years to recover,” he says, adding that he “doesn’t even look” at his 401(k) because he’s confident of the eventual turnaround.

Still, he and his wife are finding it difficult to make ends meet.They still go out for dinner, “but we don’t go here anymore, we go here,” Herndon says, shifting his hands from one side to the other.

Even so, after they pay the $1,100 a month mortgage, other expenses are forcing them to dip into their savings.

So he’s developing a marketing strategy for a business he wants to launch — he won’t elaborate except to say it could benefit from the problems people face in a tight economy.“We need the extra money,” he says.

Richard Carlson is rocking back and forth on his heels in a shopping mall on Green Valley Parkway, thinking about simpler times, when people “didn’t kick you when you were down.”

The lifelong Las Vegas area resident wonders how his $3,500 monthly Teamsters pension — earned over 30 years working as a bellhop, doorman and gardener — Social Security benefits and tiny Naval Reserve pension are going to hold out.

His monthly payments include $1,200 on a mortgage, $400 on a truck, and a big chunk of money to help his 94-year-old mother, whose own savings are being drained by the assisted-living home she lives in.

“I’ll tell you, I won’t be buying another new truck again; I’ll run this one into the ground,” he says. “I’m not traveling like I would. At the end of the month, I pretty much have nothing left.”

His question is whether a Great Depression, if that’s what all this turns into, will hurt or possibly help the country.

"I’ve cut way back, but that’s not so bad,” he says. “I just wonder if maybe what happens will wake us up.”

Robert Southerland, 73, says he’s known for years where the nation’s economy was headed. That’s why he doesn’t use retirement fund managers to handle his money. He does it all himself. “I invest in commodities, things that are real,” says Southerland, a part-time actor whose day job is selling for a window manufacturer.

His investment philosophy, he says, has saved him from some of the worry weighing on other retirees. “I’m not sitting pretty,” he adds. “But I saw this coming ... And you can’t take it too seriously. Stuff cycles back and forth. The price is always right, the only thing we don’t know is, when that price is coming around.”

Alex Richards contributed to this story.

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Retirees' Nest Eggs Take a Hit: South Florida Retirees Who Rely Heavily on Investment Income Are on the Front Lines of the Wall Street Debacle.

IStock Analyst, Thursday, September 25, 2008 6:00 AM
(Source: The Miami Herald)By Martha Brannigan, Monica Hatcher and Amy Sherman, The Miami Herald )

Like many American retirees, Gerry Lackey is fretting over how the turmoil in the financial markets will crimp his plans.

The retired lawyer, who counts on savings and investments for about half his income, has watched in dismay as major stock markets plummeted about 19 percent this year. "I don't know if I have enough years to allow the market to come back."

Retirees like Lackey, 69, who depend on investment income to help buy groceries and pay the bills, are among the most vulnerable groups scrambling for cover in the current market upheaval. South Florida, with its wealth of retirees, may suffer disproportionately because of its large number of older souls whose financial well being is closely tied to Wall Street.

"This whole debacle is so much harder on older people -- approaching retirement and those in retirement," said Alicia Munnell, director of the Center for Retirement Research at Boston College. "They're jammed: They don't have the time and space to bounce back like someone in their 30s or 40s."

South Florida financial advisors and estate and trust attorneys say they are fielding numerous inquiries from nervous seniors. "There is a high degree of concern," said Michael A. Dribin, head of the estate planning and trusts practice group at law firm Broad and Cassel in Miami. "They may not be working anymore, and so are not in a position to put new funds into their savings."

TOUGH POSITION

Experts say many older folks were already poorly positioned for their golden years, as 401(k)s and IRAs, or Individual Retirement Accounts, have replaced traditional fixed retirement plans that dole out monthly checks.

According to AARP, only 20 percent of U.S. workers are covered by old-style defined-benefit retirement plans. That means most people are left to fend for themselves: They have to look to 401(k)s and IRAs for their nest egg.

The rub is many people haven't made adequate contributions to the voluntary plans. On top of that, a lot of people have tapped their IRAs and 401(k)s indiscriminately to pay for everyday expenses, luxury purchases or vacations.

"The balances were already modest," Munnell said. "Now, to have them hit by this storm is just a death blow."

Even before the current crisis, a key problem was people thought they could retire sooner than was realistic, experts say. "Too many people retire too early. They thought the market was going to generate 10 percent to 15 percent a year," said Margaret Starner, senior vice president and financial planner with Raymond James in Coral Gables.