News Room
'Golden years' losing luster amid deep investment losses Many retirees fear lengthy downturn
By Todd Wallack
Globe Staff / October 18, 2008

"Golden years" suddenly look terrifying. As the stock market has unraveled, so have her plans for a secure retirement.

"I'm scared to death," said Yarbrough, 76, a former public school teacher in Sudbury. "I'm too old to go back to work."

Like other older investors, she is finding it hard to heed the advice many financial planners are dispensing these days: Stay calm, think long-term. That's easier for people whose careers have decades to go. But for retirees, and those who plan to leave the workforce soon, fears of a prolonged economic downturn are intense - they might need to tap into savings for everyday expenses and can't wait years for a recovery.

Since financial markets peaked last October, the Dow Jones industrial average is off 38 percent and the S&P 500 has shed 39 percent of its value. After the technology crash in 2000, it took nearly seven years for the S&P 500 to regain its previous highs.

A Suffolk University/Boston Globe poll taken in September, before this month's steep stock market decline, found that for Massachusetts workers on the verge of retirement, anticipation of a less stressful lifestyle has been replaced by deep concern. Fifty-six percent of residents age 55 to 64 were "very concerned" about the safety of their investments, more than any other age group. The Congressional Budget Office recently estimated that the market wiped out $2 trillion in retirement savings over the past 15 months.

And an AARP nationwide poll conducted last month indicated that one-third of workers 45 and older are so alarmed by the economy that they have considered putting off retirement, and one-fifth have stopped adding money to retirement accounts.

"They are very concerned," said Brenda Wenning, principal of Wenning Investments LLC in Newton, which helps manage investments for many older workers and retirees. To help protect her clients, Wenning moved much of their money out of the stock market in June, sparing them from some of the most brutal losses over the past few months.

Older workers and retirees wonder whether their remaining savings, even in conservative investments, are safe, and those who rely on dividends and interest to pay bills are watching their income shrink as companies slash dividends and US Treasury bills offer meager interest rates. In addition, many have watched the value of their homes steadily decline. The worries about making ends meet are compounded by the high costs of food and fuel.

"What we're going through is hurting workers of all ages, but it's more difficult for older workers because they have less time to recover and replace those losses they are suffering now," said Deborah Banda, AARP of Massachusetts director. Banda said the problem is exacerbated by the fact that a growing number of companies are scrapping guaranteed pensions in favor of 401(k) savings plans, spurring many employees to rely more on the stock market for retirement savings.

Bernadette Connaughton, 69, a retiree from West Roxbury, said she decided to look for a part-time job a month ago after watching the value of her mutual funds decay. She recently placed an ad on Craigslist offering a dog-walking service, as a way to generate extra income.

"I don't make enough from my pension and Social Security alone," Connaughton said.

Marguerite Sullivan, 65, who works part-time for a community health center, said the shaky economy derailed a planned trip to Europe to research her family history.

"Now those are dreams," said Sullivan, a West Roxbury resident. "What I thought I had was gone."

Sullivan said she is trying to stay calm whenever the Dow Jones average falls by hundreds of points in a single day. But it hasn't been easy - Sullivan knows she will have to rely on those investments when she stops working altogether.

Nearly one-quarter of workers ages 55 and older said they had at least $250,000 in investments - excluding home equity - compared with just 2 percent of those 25 to 34, according to the Employee Benefit Research Institute, a Washington, D.C., nonprofit. But that money can shrink fast when the markets tumble.

Roland Barrett, 66, of Milford said it is hard to watch years of savings evaporate, even though he doesn't need to cash out his investments now.

"You had what you thought was a lot of money," Barrett said. "Now you have that much less."

Phyllis Spiro was looking forward to retiring from her job as a benefits assistant for a Boston law firm, or at least taking part -time work. But not anymore.

"I'm going to die on the job," said Spiro, 70, of Norwood. "I would like to stay home, but that is not going to happen now. . . . I need the money and I need the benefits."

And Kate Collins, 75, of Medford said she's had to cut back on the amount she spends on food as her investments have withered. "The economy is terrible," said Collins, who attended the Senior Benefits Expo at Boston City Hall this month, where nonprofits and government agencies provided information on housing and other benefits to seniors. A similar meeting was held in Taunton this month.

To be sure, not every senior has been affected by the market swoon. Many retirees rely solely on pensions and Social Security for income and don't have any significant investments. Others say they can afford to wait for the market to spring back.

"Investing in the long run means that you can ride out a storm like this," said Stephen Soffron, 65, a retired industrial engineer from Marblehead. Soffron said he doesn't need to sell any of his investments right away and is optimistic stocks will go back up.

Still, many Massachusetts seniors are worried.

Allen Williams, 66, of Franklin had been hit by a triple whammy - the slowing job market, tumbling stock indexes, and the real estate slump.

Williams, who manages a small electronics manufacturing company, is taking a buyout this month. He's been trying to sell his Colonial-style home since May. And his 401(k) has lost 30 percent of its value.

"I have a tremendous sense of timing," Williams said wryly. "It's kind of hard to be cheerful."

If the stock market hadn't declined, Williams said, he would probably be looking forward to spending more time with his family this winter. Instead, he plans to hunt for another job.

"The next time it goes up, I think I'll take the money and put it in a sock," he said.