Revising retirement: Declining markets, rising costs force older

0 Comments | Deseret News (Salt Lake City), Jul 6, 2008 | by Jennifer Toomer-Cook Deseret News

Bob Wassom was at the top of his career when the advertising company he worked for merged with another. Five years later, his contract was not renewed.

That was in 2006. Wassom's buyout kept him going about a year. Now the freelance writer, too young to retire at age 58, is looking to his 401(k) to help support his family and help an adult daughter with medical bills. He plans to take out about 40 percent of his previous salary each year for five years -- taxed without penalty.

Tapping into the nest egg can be unsettling, but more baby boomers are having to do it. They also are watching their retirement savings dive in a bear market. They're paying more than $4 a gallon at the pump. And food prices have jumped in recent months along the Wasatch Front.

As a result, some older workers are choosing to delay their retirement. And some retirees -- about 10 percent, according to one estimate -- are coming back to work to make ends meet. That is, if they can find a job.

The AARP found that one-fourth of the nation's 45-and-older crowd, surveyed in May, were struggling to make their rent or mortgage payments. Twenty-seven percent of workers said they were postponing retirement plans. The study included 1,002 respondents nationwide.

A retirement survey conducted in January by the Employee Benefit Research Institute in Washington, D.C., found that 38 percent of those over age 55 expect to retire after age 66. Ten years ago, the same number thought they would retire between age 60 and 64.

In recent years, experts predicted that baby boomers, people 44 to 62 years old, would contribute to a massive wave of retirement, starting about now. That may no longer be.

Wassom isn't sure he wants to come back to the 9-to-5 world. A 36- year-old spinal cord injury still bothers him. He's hoping networking, contract work and freelance jobs will keep him going four more years, when he'll be old enough to retire.

"I'm doing OK but not making nearly the money I used to," said Wassom, taking time out from contract work at the AARP Utah offices in Midvale. "It's good -- I'm finding new freedoms. But it's kind of scary ... waking up in the morning and not knowing what's going to happen."

Falling markets

Employees 55 and over will become the fastest-growing group of workers in the nation, making up almost a fourth of the work force by 2016, according to the U.S. Bureau of Labor Statistics. That's up from 17 percent of the work force in 2006 and 12 percent in 1996.

People are living longer, and fewer younger workers are coming into the labor force because U.S. population growth is slowing. Meanwhile, pensions have been replaced by 401(k) plans, leaving the responsibility of retirement saving and investing up to workers. Workers also have to be older to get full Social Security benefits - - for a person born in 1955, it's 66 years old, versus age 62 for older workers.

Sharla Jessop, vice president of Smedley Financial, sees some clients who didn't plan for retirement early enough and who are battling the tough headwinds of the current market. "Their income is really being squeezed," she said.

Rob Ence, state director of AARP Utah, said that people getting ready to retire face challenges. Insurance coverage is expensive and tough to come by for unemployed workers over 50. And they face the difficulty of managing a 401(k).

Retiring is difficult for those people who don't make a lot of money, Ence said, and for those who didn't save enough when they were young.

And younger baby boomers also can't count on Social Security payments continuing forever. The federal Social Security program, which for decades has helped retirees, simply might not be around past 2040, "at least the way it's currently figured," said Sterling Jenson, regional managing director for Wells Capitol Management.

The market isn't helping matters. As of last week, the Dow had dropped a full 20 percent since October. That mark typically signals the beginning of a bear market.

The market's effects on retirement vary with individual cases. But 401(k)s dominated by stocks, or worse, a single-company stock, "have seen a significant deterioration in their valuation," Jenson said.

Market plunges have worried retirees and people who are nearing retirement age. The AARP survey found nearly one in five workers ages 55 to 64 planned to delay retirement because of the downturn in the economy. One-third of that group cited shrinking portfolios.

"We have seen an increased number of people ask about retirement," said Zan Hughes, branch manager of Fidelity Investments in Salt Lake City. "They're very concerned about it."

But the market's effect on someone's 401(k) is symptomatic of a larger problem, said Jeff Salisbury, principal at Independent 401K Advisors, a fee-only advisory firm with offices in Cache and Davis counties.

"I think frankly the real problem, and the thing that concerns me the most, is people, starting at younger ages, are just not doing the right things," Salisbury said. "As unsexy as this sounds, they're not saving enough."