Retirement on hold?

[Kev Godwin]

This week I was talking to my uncle who is nearing the time he wants to retire and he informed me he had to change his long desired plans. With the big downturn in the investment markets, he said he has to continue to keep working so that he can even think about retiring some time in the future. I can't help but believe this is the case for many other people that were approaching their awaited retirement.

On the other side of this coin is one of my nieces that is a recent college graduate. She can hardly even find somewhere to even interview even with an excellent GPA in an engineering major.

I can't help but wonder if the older workers are not moving out due to financial reasons and thus middle and lower working positions can't move up. Thus, the new workers can't enter the workforce since there are no openings at the lower entry levels.

I am not an economics expert but I can't help but think this must have some contribution to increased unemployment rates we hear about every darn day. My guess is the rising unemployment rate is partly due to more people needing to work compared to just about 18 months ago. My guess is many people didn't have to continue working if they had their assets from before the melt-down.

My slow logic tells me unemployment is rising in part because more people need to work, but just can't find any (the workforce is larger). I know this isn't the sole or only reason but I think it may be part of it.

Can some some Wall Street Journal reader enlighten me?
Kev

[Ken Fitzgerald]

Kevin....this could be an interesting discussion but historically there are a number of folks here who can't keep politics out of this type of discussion. Good luck!


That being said.....I'm caught between a rock and a hard place....I'll be old enough to retire with a full retirement in 6 months and yet with the stock markets down...and my 401K down by 30%.....I'll probably not be able to retire for at least 2 more years. I broke my back almost 8 years ago...I'm now 8mm shorter than I used to be.....I'd bet my next paycheck that I could have surgery performed on both knees........I've supported myself since I was age 15 and began working on oil rigs in southern Illinois for my driller Dad. I'm worn out and tired...and one of my main concerns about dying is that I'll die "in the harness" rather than standing at the bed of my lathe or traveling with the LOML. It's possible that your theory has some merit. And yet with all of the RIFs that are happening....one of my co-workers for the last 31 years and 2 different companies...got laid off last Friday.....forced to retire early and they aren't going to hire a replacement. I could be in that boat any day. 2 more years and the house belongs to the LOML and I. Things will be somewhat easier then... But that's life. If it happens I will find a way to make it

[Ted Calver]

I'll bet there are a lot of us in the same boat. 401's reduced by almost half and retirement plans on hold. Trouble is a lot of companies are taking a close look at senior employees and are RIF'ing them in favor of younger (and cheaper) staff, or just not hiring. I could see it coming a while back and voluntarily semi-retired to a three day work week. I think it's gonna get worse before it gets better.

[Greg Peterson]

There are no good solutions at this stage. I'm afraid that only the bad, worse and worser decisions are left on the table. And no matter what is done, not everyone is going to be happy.

I feel bad for the folks that are on the cusp of retirement or have recently retired. I have enough time left to where either we have fully recovered and maybe even had a dip or two in the meanwhile, or we'll have completely lost our standard of living and be left to compete with second world nations.

I don't know how the college graduates can pay back their student loans, buy a house and raise a family. No wonder many couples are waiting well into their thirties before having kids. They can't afford it otherwise.

Hope for the best, expect the worst. And I don't think we've seen the worst yet. Interesting times we live in.

[David DeCristoforo]

Well I'm no economist but I have never put much stock in the idea of retirement. "Golden years"? Nature does not offer any "golden years". You get old, you can't keep up... you get left behind and something eats you alive. That's your golden years. Better to do it the "old way". You work till you die. Maybe you become a "master" and teach the younger guys how it's done. Our society has lost touch with the idea of age = wisdom. We want to put old people out of sight, "retired'' and safely stashed away somewhere. Not for me, thanks. One advantage of thinking like this is that since I never planned on "retiring", I don't have to feel cheated because I can't. I hope I drop dead in the shop one day. Or maybe while I'm jumping to old lady (hehe). I've already told my wife and kids that if I get to go like that, I'll be happy. I don't want to sit around playing shuffleboard and taking cruises. Get that movie called "Secondhand Lions" with Robert Ducal and Michael Caine as two aging "soldiers of fortune" who die in their 90's trying to fly an antique bi-plane upside down through a barn.... That's for me!

[Tom Veatch]

I know the stock market is not the economy, but people seem to point to that as an indicator of how bad the economy is. Taking that as the indicator, as of today's close, the Dow is higher than it was at anytime in history prior to about June, 1997. Does that mean our economy is in better shape than it was at any time prior to '97? If you look at a chart of the historical Dow values, it's easy to view the time since about '95 as the aberration and the current market movement as a correction back toward the levels where it should have been all along.

Personally, I think far too many people, including the news media, put way too much emphasis on stock prices as an economic measure. And in the classic response of a positive feedback system, the panic continues to feed on the fear generated by the panic.

I suspect that many of those who have put their retirement on "hold" are doing so because many companies went to "defined contribution" retirement plans (401k, etc.) instead of traditional "defined benefit" pension plans. My wife and I were both covered by traditional pension plans and the current downturn doesn't affect the benefits paid by those.

The "mark to market" values of the holdings in our IRAs have decreased significantly through the downturn, but I don't expect to draw down on those until the government forces me to start taking "Minimum Annual Distributions". So, the "mark to market", "funny money" value of those holdings is interesting, but, for the time being, only from an academic viewpoint.

[Ken Fitzgerald]

Tom

I agree with you. Today too many people place credance in what is reported. Bad news grabs attention, ratings and therefore higher advertisement charges.


Like you, I am covered by a defined benefit pension and so is my wife and I'm already drawing a defined benefit pension (small) from another corporation. That being said....I still have a few tools that I want to add to my shop. Even at today's market value, I could sell some of my stock and pay the house off. But it would sure cut into the tool and travel budget.:mad:

[Randal Stevenson]

My father turns 65 this year, and was wanting to work two more years til a certain maternal person reaches retirement age, (and if she see's I mentioned her age, I am dead). Now they thought they would have to work longer due to the amount the stock market/investments took.
Then Christmas and my father going into the hospital for the first time since he was nine, happened. Six weeks later and he is out and being rehabbed. We don't know, he may have to forcibly retire now. Life for them (as well as the rest of the family, kids etc (everyone tries to help out), could get interesting.



I don't know how the college graduates can pay back their student loans, buy a house and raise a family. No wonder many couples are waiting well into their thirties before having kids. They can't afford it otherwise.


I believe this in part is the reason we are in this mess. Credit card companies, targeting people with no income yet (don't know financial responsibility). Then they get out with one or more debts, and want a house (and thanks to some financial footwork, qualify, when they would have been unqualified before), etc..

I have about 3 years left on my mortgage, in part thanks to not biting off more then I could chew, and not upgrading, to keep up with the Jones. I had to quit school when I bought my home, and hope when I get it paid off, to go back. But then I will be older (38 now), and who knows what the job market will be, etc.
I think I am on an old method. The WUID program: Work Until I Die.

[Dave Verstraete]

Kev
I think that you've hit the nail on the head. I've got it!! The next stimulus package will be targeted at +55 year olds. The package will deposit 10 million dollars in each of our bank accounts....then we will retire to make room for the next generation....hmmm.....

[Dave Anderson NH]

Kev and Tom,

A couple of notes on unemployment and the Dow Jones.

The unemployment numbers are those reported to the Federal Dept of Labor by the states and only include those who are currently registered or covered by unemployment insurance. Those who have had their benefits expire are no longer listed as unemployed since there is no way to keep track of them. Hence, the numbers and percentages are seriously under reported.

The high Dow Jones number compared to 15 or 20 years ago is due to a change in the index itself. The DJ is a composed of a number of stocks chosen by DJ as representative of a wide range of industrial and commercial areas of the economy but if I remember correctly it only consists of less than 40 individual companies. As an example, it contains 6 shares of company A, 3 of company B, 12 of company C, etc. Over the years the companies included have changed and so has the total number of shares making up the basket. Hence a DJ of 20 years ago at $1132.26 is much different than the current one at yesterday's slightly less than $7500 reading. DJ is NOT a very good indicator of the broader economy.

[Gene Howe]

My wife was a teacher for 37 years. The school where she worked just laid off every teacher's aide, froze all hiring of teachers and is not replacing those that leave. And, it looks like they may cut out the "shop classes", too.

Wife and I are both on defined benefit type plans. We retired 2 years ago.
We built our present home (with some framing help) 9 years ago. Took almost two years to complete, but we have no mortgage.

The best financial decision we ever made (I think) was investing in gold coins starting in 1976. Our first coins cost us $297 each. We are still buying each month and the last ones we bought (2/15/09) were at $966.

[Bob Rufener]

I am 5 years older than my wife and retired. My wife is teaching and would like to retire but the health insurance is a major problem. When she retires, she will get a nice pension from the state but no provisions for health insurance. We checked out getting insurance and they denied coverage because of pre-existing problems which, in my mind, aren't really severe. She has some problems with acid reflux and some osteoporosis-neither of which are major issues. I can go on medicare but she has 5 years to go before medicare so insurance is a big deal. My pension is going to take a big hit because of the stock market but I work part time and have no problem going back to work full time if need be. Hopefully, the economy will recover and we can all rest easier. I really feel for those people who are getting laid off or losing their jobs. It makes life tough.

[Rich Engelhardt]

Hello,

You get old, you can't keep up... you get left behind and something eats you alive
LOL!
A man after my own heart!

Retire?
Bah - I think I'd rather drink Drano or sit on a panel raising bit ;).

[Belinda Barfield]

I'm not sure I'm smart enough to join this discussion, but that usually doesn't stop me. :o

I find it interesting that we constantly hear about record unemployment, but we never heard about record employment. Prior to this "crisis" we had record numbers in the work force.

My company is a supplier for a very large local company, one that we didn't expect to feel any pain from the economic downturn. On Friday they laid off all contract employees, and froze internal and external hiring and promotions. All employees did receive their scheduled raises, so that was a good thing. This affects our business as they are now bringing manufacture of the products we provide back in house. I did NOT see that coming.

I agree with others, this is going to get worse before it gets better. My father retired five years ago, my mother retired this past December. They are doing okay so far, but only because they have always lived a frugal lifestyle. They have no debt. Heck, neither one has a "credit history" so they have a lot of difficulty when they buy a new car. Some people just don't understand the concept of cash.

[Brad Wood]

numbers and what is reported, counted, etc... it's hard to know exactly how bad it is. I'm thankful I have a job at the moment, thats for sure. My 401k nose dived just like everyone elses.

Three months ago I hired a programmer from HP. He is basically doing a career change - not from programmer, but from environment. I am the IS Manager for a credit union and he is coming from the hard core engineering world (his programming code has gone into space on the space shuttle).
I'm not sure how old he is, not appropriate for me to ask, but I figure he is right around late 50's. ... Since coming to work for us, all his co-workers at HP have lost their jobs. You want to talk about a grateful employee? Holy crap.
Not only is he grateful, he is dedicated, focused, enthusiastic, etc. He has only been here three months and he is already shaping up to be one of the best hires I have ever made for the department/company.
I had an intern for six months last year. He was in his early 20's. Some words to describe him.. lazy, unmotivated, lack of detail, lack of attention, etc, etc. I really gave him all the chances in the world and there was potential for the job to become full time (which he knew)... complete slacker and I let him go.

there is a moral to this story somewhere.... oh, right, .... it may be harder to younger folks to find a job becuase older folks aren't retiring like they might normally... but as far as I'm concerned, I think the baby boomer generation has a whole different work ethic you don't find in the gen Y generation and in a lot of cases even the gen x generation (I was born the first year of gen x... 1965, so Im a cusper)

[Belinda Barfield]

there is a moral to this story somewhere.... oh, right, .... it may be harder to younger folks to find a job becuase older folks aren't retiring like they might normally... but as far as I'm concerned, I think the baby boomer generation has a whole different work ethic you don't find in the gen Y generation and in a lot of cases even the gen x generation (I was born the first year of gen x... 1965, so Im a cusper)

I have to agree with you on this one Brad. I was really bogged down in a project over the last two weeks, finally completed. I frequent a local restaurant when I'm too lazy to cook and I know all of the bartenders there (okay, so I frequent the bar as well). One young lady has always struck me as a real go getter. She's smart, well spoken, recently graduated from college, and looking for employment. I brought her in to help out for a couple of days as a trial. In conversation we got around to discussing her difficulty in finding a job after a boatload of interviews. Basically, she wants to make 40K a year - and thinks she deserves that because she has a degree, doesn't want to start out in any "low level" position, wants to work 9 to 5 with four weeks vacation a year to start, and a full benefits package. My reply to her . . . Good heavens girl, don't we all!

[Brad Wood]

I have to agree with you on this one Brad. I was really bogged down in a project over the last two weeks, finally completed. I frequent a local restaurant when I'm too lazy to cook and I know all of the bartenders there (okay, so I frequent the bar as well). One young lady has always struck me as a real go getter. She's smart, well spoken, recently graduated from college, and looking for employment. I brought her in to help out for a couple of days as a trial. In conversation we got around to discussing her difficulty in finding a job after a boatload of interviews. Basically, she wants to make 40K a year - and thinks she deserves that because she has a degree, doesn't want to start out in any "low level" position, wants to work 9 to 5 with four weeks vacation a year to start, and a full benefits package. My reply to her . . . Good heavens girl, don't we all!

you bring up a good point that I didn't even think to mention. As a credit union we obviously hire a lot of tellers. These are entry level positions and for the right person that is willing to put their time in, there is a LOT of upward mobility in the company. You will never get rich working for a credit union, but you can do well enough over time. We have a huge turnover problem at the bottom because the younger workforce that takes these positions in the first place have serious entitlement issues.
The guy I spoke of that I hired three months ago has 30 years experience as well as engineering degrees. I literally felt bad when I offered him the position with the salary we had for the position. He took the job without a second thought... right over the phone without hesitation or "I need to discuss with my wife". No concerns about vacation time, etc.

[Tom Veatch]

... DJ is NOT a very good indicator of the broader economy.

Exactly my point.

[John Fricke]

My son received his bachelors in Food Industry Management in Dec of 07. We knew the job market was getting tough, but I told him to take a year to try and land a job in his field. I know from personal experience job hunting while working is difficult. He's a hard-working kid (grew up on a farm) so he did a lot of lawn mowing and and some part-time landscaping while he was searching. He just started in a sales position with Kraft foods about a month ago. What a relief. Sales wasn't his first choice but they pay him well and he has excellent benefits. He worked at finding work very hard. He sent out a ton of resumes, traveled to several different states for interviews. While 10% or so are unemployed........90% are employed. We need to start looking at the positive side a little more I believe. My wife and I are fortunate to be in the best financial shape we have ever been. As long as people continue to get ill (she's a nurse) and winters continue to be cold (I deliver propane) I feel pretty secure with our jobs. We are squirreling away as much as possible though because nothing in life is a sure bet. Sorry for the ramble.

[Tom Veatch]

...Retire?
Bah - I think I'd rather drink Drano or sit on a panel raising bit ;).

I guess it all depends on what "retire" means. I enjoyed the work I was doing while gainfully employed, but "retired" in '02 when the company offered an early retirement package that I simply couldn't turn down.

No longer wear a wrist watch. Go to bed when I'm sleepy. Get up when I wake up. Work on what I enjoy doing, when I want to do it, instead of what some higher ranking executive directs on his/her schedule. The "honey-do" list being a notable exception.

The only TV I watch is the occasional DVD movie SWMBO brings home from the bargain bin. I actually do not remember the last time I sat through a TV program of any kind, but it's been years. Don't have cable/satellite. I already ignore about a dozen over-the-air TV channels. See no reason to pay good money to ignore 300 cable channels. Have discovered several authors whose work I thoroughly enjoy. Spend several hours every day in the workshop. The days pass entirely too fast. Wish I could have retired 30 years ago.

If "retirement" means "sit on the sofa and watch reruns of 'As the Stomach Turns'", I have to agree with you, go ahead and make my appointment with Dr. Kevorican.

[Fred Voorhees]

Interesting topic. I am 4 1/2 years away from retirement, at least that is the plan and I am hoping that the current economic crisis is well over and done with by the time my planned retirement at 55 comes around the corner. I hate to think that I am forced to work longer until the economy is better.

[Scott Shepherd]

I certainly don't mean this to take a shot at anyone, but if your investments are down that much, then you need a better (or one to start with) financial planner. Also, if you are 2 years from retirement and all your money is still stuck in stocks, you're making a huge mistake (as you probably already know).

I know it's tough, as everyone wants to squeeze every last penny out of the market before they retire, but any financial adviser worth his/her weight, would never have you stuck in stocks right up to your retirement days.

It's never too late to go speak to someone about it. If you are not happy with the direction of your investments, fire the investor and find one that's listening. I know financial planners and I stay in touch with them. They all tell me there are many ways they can help protect your investments in this turbulent market.

[Ted Calver]

Scott,
It sounds like you have far more flexibility in managing your nest egg than many of us holding 401k's. There is only one option in my plan not currently losing money...and we are limited to one move every six months.

[Scott Shepherd]

Ted, if you've got more than 2 years left before retiring, then look at this as a fantastic opportunity. It's not often that you get to buy things on sale. Even though your overall portfolio might be going down, it also means you can buy more shares each time. It means you will be accumulating a lot more shares during these tough times. When the market comes back (and it will), then your gains will be accelerated and you'll look back on this time as a great time.

There were more millionaires made in the days of coming out of the great depression than any other time in history. Buying companies while they are on sale is a rare opportunity.

[Frank Hagan]

401ks suffer from limited choices and restrictions on what you can do. I'm still 14 years away from retirement at 67, so I'm not too worried about my stock exposure (and being down a little over a third). Even the so-called "target funds", named after the year you retire, are down about a third. Even bond holders got whacked in this recession.

My rollover IRA is different; I have a lot more flexibility and I'm down more. My plan is to convert to a more-bond and fixed income orientated mix in the next few years, so that I'm about 50/50 10 years out. The last five years will see the rest transitioned to fixed income, so the trick is taking profits as funds get "hot" buying the fixed income stuff. I may start working toward that goal in late 2009 or 2010 (depending on when the current slump ends and we start going back up ... some bears are predicting a Dow at 6,000).

If inflation returns like it did in the 70's and 80's, CDs could become attractive again.

[Greg Peterson]

Scott, you'll have to excuse me if I don't share your enthusiasm for buying stocks right now. A lot of us are just kind of along for the ride and have little control over our nest egg.

I know some folks are anti-union, but unions didn't steal trillions of dollars out of our pockets, and then have the nerve to come back and ask for more.

Madoff stole $50 billion dollars and he gets to sit in his penthouse, even after defying court orders to not move any of his assets. Wall Street basically has a license to steal. I'm still waiting for the market to correct itself, but I'm not optimistic that the corporate elite are all that concerned.

[Rod Sheridan]

I'm hoping to retire at 55 in 4 years.

Like most people here, my retirement savings have taken a temporary downturn, however in 4 years they should be doing better. I don't own anything that's likely to not recover.

At 55 I'll be able to take a reduced, defined benefit pension from my employer, and of course Canada pension.

Being Canadian, healthcare insurance isn't a consideration for me, for which I'm grateful after reading some of the posts on this forum.

Regards, Rod.

[David G Baker]

If a person has a lot of cash laying around earning low interest, buying stock at this time is possibly one of the best ways to get a good deal of growth over the next 5 years. The market will recover and there will probably never be a better opportunity to purchase high end stock at the current low prices. Buy low sell high is a very good philosophy instead of the norm of buying high and selling low in a panic.

[Richard M. Wolfe]

It seems that there are two sides to a downturn. One is how severe it is. There's been a lot of talk about that. The other is the length of the downturn. Most people seem to think in terms of putting things on hold "for a while", because the ups and downs of the market/economy have been pretty short cycles for decades. So how long will this downturn last? No one knows and chances are not like the Great Depression which was over a decade long. I don't know what the Great Depression was like and I don't want to find out except by reading and hearing stories. So as far as buying stocks now - sure, a pile of loot is to be made when it turns up. But how much lower is it headed and for how long will it be down? Like I said, it almost surely won't be like the "big one", but in reading about it a statement was made that very few who bought stock in 1929 lived to see the value recover in full.

[Greg Peterson]

Rod,

For better or worse, our health care system is tracking on an unsustainable trajectory. My wife and I are the only ones on our health plan (we work at the same small company) and the annual cost of the premiums exceeds that of our mortgage. Fortunately our employer picks up a large portion of the cost.

Despite the fact that we do have insurance our health care IS rationed. It is a simple plain fact that Americans on whole, receive far less health care than any other industrialized nation in the world. Our life expectancy is lower than most countries and our infant mortality rate is higher than any other industrialized country, yet we pay far more for health care than any other country. We simply are not receiving a fair return on our investment.

Health care is a huge expense. There are no simple answers as to how to fix it, but with all the different models used around the world surely we can pick and choose what components work best.

Losing a job in today's world not only means potentially losing your home, but your ability to seek treatment any illness, injury or disease you or a family member may get is severely compromised.

[Von Bickley]

Everybody has their own story about taking early retirement. My sister retired when she was 55 and enjoyed about 1.5 years of retirement life. She suffered with cancer for 5 monthes, died and was buried at age 57.
I sure am glad she took her early retirement to enjoy life. Put retirement off, and you may not get to enjoyed any of it. A bad day of retirement is better than a good day at work anytime.

Retired and loving it.......

[Matthew Minnig]

I second the advice on financial planning. This is an area where you can not afford to make mistakes. If your company does not offer you enough options with your 401k then I would forget about it and start an IRA on your own, especially if your company does not match contributions. If they do match fine, contribute whatever the match rate is and use the leftover to start an IRA in addition to your 401k. Better to be safe than sorry :(

[Frank Hagan]

If a person has a lot of cash laying around earning low interest, buying stock at this time is possibly one of the best ways to get a good deal of growth over the next 5 years. The market will recover and there will probably never be a better opportunity to purchase high end stock at the current low prices. Buy low sell high is a very good philosophy instead of the norm of buying high and selling low in a panic.

There are some good buys out there in stocks of companies you know, that are still profitable, trading at very attractive P/E ratios. I bought some L. S. Starrett stock in 2007, and of course its down quite a bit from then. But I've added more to try and average out the purchase price. Starrett's a good solid company, with a P/E of 7.4 and EPS of 1.34 with a stock price now down under $10.

[David G Baker]

I retired shortly after turning 55 because the males in my family on both sides do not have a history of longevity and the average life expectancy of someone in my career field lives an average of 18 months after retiring. I just turned 65 so I have made it 10 years so far.
Frank H.
I no longer invest in individual stocks I invest in mutual funds and hope that the diversification gives me a little more protection. Didn't work this time. I am too old to be as deeply invested in stock mutual funds as I was (70%). Took a 35% hit but waited for a day where the market peaked and dumped everything into money funds. I plan on waiting a while then dollar cost average back into around 40% stock funds some into bonds and some into money funds.

[Scott Shepherd]

I think it's a sad, but true statement to say that most people know more about their favorite tv series or nascar driver than they do about their own finances that are in the market. I've never understood why they don't teach 2 things in school, from grade 1 through college- financial planning and interpersonal communication skills. Those 2 alone are vital, in my opinion. Yet neither are taught to our country's children. They'll teach them about things they'll never use or need to know for the rest of their life, but they won't teach them how to communicate with others (key in the workplace, whether you are a worker bee or the queen bee) and how to manage your finances.

I hope all who have watched their 401's drop get all their paper losses back in the very near future. It's a terrible thing to watch and I know many people in the same situation. I worked with a guy who was close to retirement a few years ago and he always complained about his statements. I asked him one day how much time he spent researching it so he could make sure his money was working the best for him. He said "None, I don't have time for that". I was shocked. I always thought he should stop reading the sports section and start reading the finanical section if it was as important to him as he said.

[Richard M. Wolfe]

I've had the conversation about teaching financial 'prudence' with a friend of mine. We pretty much came to the opinion that waiting till they get of school age is too late. Teach them saving etc. early. The best teacher is to set a good example. Do as I say.....and as I do. :)