Seniors worry about their nest eggs
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BY MATT OLBERDING / Lincoln Journal Star
It wasn’t that long ago that Sharon Cochrane felt pretty good about her retirement prospects.
She had a good job as a designer of kitchens and bathrooms and a healthy retirement nest egg.
Her plan was to work until January, when she’ll turn 66, and then retire and start drawing Social Security.
“I had hopes, with my financial holdings and Social Security, that I could live 20-25 years comfortably,” Cochrane said.
But then she lost her job, she says, when her company cut back.
And now, with the financial and markets meltdown in full swing, she has watched her savings lose nearly half its value since the beginning of the year.
She’s getting by with unemployment benefits and part-time work as an adjunct instructor at Southeast Community College.
She’s also been looking for other part-time work, so far without success.
She still plans to wait until her 66th birthday to tap Social Security, but the rest of her retirement plans have become a lot less clear.
She thinks she’ll probably have to work part-time, at least for a while, which is not what she had been planning to do.
“It’s very worrisome to me, as in tears worrisome,” Cochrane said.
Retirees and people nearing retirement nationwide are watching with a combination of fear and awe as their savings deteriorate.
A financial and credit crisis that intensified last week has sent the Dow Jones Industrials index down more than 30 percent from its peak a year ago. That has cut at least $2 trillion out of Americans’ retirement plans, according to the Congressional Budget Office.
Though that sum includes everyone — not just people in or nearing retirement — older workers are most likely to be feeling the brunt of the financial turmoil.
Houston Doan, an insurance and financial counselor for the Lincoln Area Agency on Aging’s LIFE office, said he’s seen at least a 10 percent increase in people older than 65 seeking help with finding a job during the last 90 days.
“We’ve really been hit over at Operation ABLE hard,” Doan said of the agency’s job assistance program.
He’s also getting more calls from people seeking financial advice.
As their 401(k)s lose value, evidence suggests more and more people are tapping into them or stopping contributions altogether.
A study released last week by AARP says 13 percent of workers 45 and older are dipping into their retirement funds to cover everyday expenses, and 20 percent have stopped contributing altogether.
“Many people are making quick-fix decisions that put their financial future at risk,” said Jean Setzfand, director of financial security at AARP.
Making those sorts of knee-jerk decisions are the worst thing retirees — or any investor — can do in the current market, financial planners say.
The time to be pulling money out of the stock market has passed, said Loren Kampschnieder, a certified financial planner with Waddell and Reed.
People who panic and withdraw money now will only lock in losses, Kampschnieder said.
“The worst thing to do is to sell at the bottom,” he said, cautioning that he wasn’t suggesting a bottom has been hit.
“People who sold right after October 1987 made a huge mistake,” Kampschnieder said, referencing the historic Black Monday stock market crash. “People who sold when the markets opened after 9/11 made a huge mistake also.”
He said most of his clients are fairly well off and he hasn’t recommended to any of them that they cut back withdrawals.
None of his clients are in danger of running out of money anytime soon, Kampschnieder said.
At worst, he tells people they may have less to leave to their heirs.
Joel Johnson agrees that now is not the time to leave the market. It’s not what he’s doing, and he doesn’t recommend it for anyone else.
The 66-year-old retired stockbroker said that if investors are well diversified, they should be OK — and by staying in the market, they are buying shares at a lower cost.
For people already in retirement, he said they should look for stocks that pay good dividends and also keep a healthy cash reserve, so “you won’t have to do something you don’t want to do.”
Johnson said he’s confident things will turn around eventually, as they always have.
“We’ll work things out,” he said.
Jerry Sellentin, too, believes things will work out.
But it’s when they get resolved that has him worried.
The 71-year-old retired executive director of the Nebraska Council of School Administrators said he keeps hearing things will work themselves out “in a while.”
“I’m not sure what a while means,” Sellentin said. “And that bothers me.”
Todd Peterson, a senior vice president at Smith Hayes Financial, said he wishes he could tell his clients when “a while” is.
Peterson said that despite all the talk of failing financial firms, there are plenty of sound companies out there.
“People all over the world still need to purchase pharmaceutical drugs, computers, software, clothes, cars, food, houses, insurance, etc. ... and there will come a time when light bulbs will go off and people will realize there are still great companies doing great things,” Peterson said.
“I just wish I knew when that day was.”
He’s reminding his clients of the reasons to stay the course, and most are heeding that advice.
That’s the course Sellentin is following.
He hasn’t made any changes in his lifestyle. He’s rebalanced his holdings on the advice of his financial adviser, but “I haven’t withdrawn everything and put it under the mattress.”
Barb Jackson, on the other hand, has started making changes in her life.
The 62-year-old from Pawnee City said she and her husband, a family physician, were part of a large group of friends who recently decided to cancel a trip to Colorado because of financial concerns.
“It just seemed like everyone kind of lost their enthusiasm for the trip,” Jackson said.
She said she’s also tried to cut her trips into town down to two a week in an effort to use no more than one tank of gas a month.
When she does go to town, the economic and stock market woes are “quite a bit of the topic of discussion,” she said.
Retirees are “just watching their retirement fund hemorrhaging.”
Cochrane, for her part, tries to remain optimistic in the face of her situation.
“People just have to start believing that things will get better,” she said.
But she also can’t shake the anxiety that comes with losing half her savings just as she’s starting retirement.
Cochrane said she lived in Los Angeles for a few years when she was in her 30s, and one of her most vivid memories was of homeless people living under bridges and sleeping in refrigerator boxes.
“Visions of refrigerator cartons under a bridge are dancing through my head,” she said “and I’m just scared to death.”
Reach Matt Olberding at 473-2647 or molberding@journalstar.com.
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So even IF we are smart enough to change course in November, to pick a new direction for our country, it's going to be a very slow process. The Republicans gave us record-breaking budget and trade deficits in GOOD times. Now that everything has crashed, we're starting out in a deep, deep hole. That means there's much less available to help us dig out again.
Bottom line? It may be a decade before we restore what the 'loyal Bushies' broke (and again, that's only if we change course in November). Young people can afford that, as long as they keep investing. But seniors? That's going to be much more difficult. But what can I say? We (collectively) get the kind of government - and economy - that we deserve. We made some horrible mistakes the last two presidential elections, so we're going to pay. I hope we've learned our lesson! "
Chicken Little wrote on October 12, 2008 9:09 am:
The markets will come and go and the financial pictures will change and change but when the sun quits shinning, that is when one really needs to be concerned. So grow up and take the lumps, you can't have something that doesn't belong to you and you can't get something that wasn't yours anyhow. So quit the stewing. "
Personally wrote on October 12, 2008 10:10 am:
oh for goodness sake wrote on October 12, 2008 10:35 am:
Remember wrote on October 12, 2008 1:36 pm:
If you are in good health you can teach Young people a thing or two by example. Live within your means, don't splurge on unnecessary items. and live comfortably with less. "
Outraged in Omaha wrote on October 12, 2008 1:37 pm:
mark wrote on October 12, 2008 2:47 pm:
Yuhu wrote on October 12, 2008 2:59 pm:
see it much if at all in Lincoln, homeless sleeping under bridges & in
boxes, but in the big cities the homeless have been sleeping under bridges, vacant bldgs, boxes, newspapers, you name it. In the big city
I lived in, for years I walked the 6 blocks to work I would have to step
over homeless people of a morning sleeping on city steam grates on the
sidewalks, covered with newspaper. Winter, the police try to get them into
shelters if there is room, but many have lived for years that way and alot
too proud to accept help. Yeah, its scary, and it could happen to any of
us. But this market rush to the exit, was warned about after the Primary
election, that if Obama won the Presidency, we would see a mass exit from
stocks, bonds and investments, because he will really sock the people
making $250,000 and up and really raise corporate taxes also. And his
"no tax" on people making $50,000 and less in high tax states like Nebraska and especially if those people have alot of medical expense are
really going to pay on the nose because instead of paying taxes where they
can itemize, the medical and high taxes are YOUR GIFT.!! Thank you very
much Nebraska!!! And Obama will have a Democratic congress to back him
all the way. Interesting how just right before the Presidential election
our financial markets tank, and it sort of appears Obama may win, yet
the blame is put purely on the subprime mortgage loans and CERTAIN
"buddies" have been bailed out. You all can take it hook, line and sinker, I don't!!! "
whatever wrote on October 12, 2008 5:47 pm:
Re WCG wrote on October 12, 2008 8:09 pm:
oooh whatever wrote on October 12, 2008 8:26 pm:
whatever wrote on October 12, 2008 9:13 pm:
Sharon Cochrane wrote on October 13, 2008 12:32 am:
To WCG and Personally - YES!!
To Chicken Little- I AM grown up, I HAVE and AM taking the lumps, and I remind yu that I have paid all my own money into these funds that have been going down hill. So don't tell me that I can't have what is not mine in the first place. I don't think you understand how this financial thing works. I put MY money into the system, my employer matches it, it goes into the stock market, it grows, or doesn't grow and then I get it or don't get it back. Hello - don't tell me I can't have something that doesn't belong to me. Take Econ 101.
To OH For Goodness Sake: POOR PLANNING NOT!!! Ever since I started investing in the '80s I have made sure that I have had the very best advice from the very best brokers. I have watched my money and how it was invested and taken care of it. Don't criticize unless yu know what has actually gone into something. Besides, what emergency have I caused you? The only one I know about is in MY mind, so it should not be causing YOU any angst.
REMEMBER: My eggs have NEVER been in one basket. My brokers are not that stupid, nor am I. I have always been well diversified. I do live within my means,my tastes are simple, I live in a 2 bedrm, 1 bath house, in a modest part of town. My car is paid for and I don't travel.
MARK: YOU? are providing MEDs for ME? I think that I worked most of my life and paid into medicare in order for ME to assure that I could assure that I could pay for the gigantic total of 3 meds that i take every month that amount to a gigantic and roaring total of about $2,000 a year. Oh, gee. Let's see, how much it will be when yu get to be 65, my dear. I am in great health - I am a skydiver!!!! What the heck do YOU do for fun and games? Also, have you ever tried to apply for jobs at 65? There is some resistance there to overcome. I apply for jobs every week, so don't give me any static about working. Also jobs in my line of work are few and far between, but I am willing to do other jobs.
YUHU - I tried to keep this non-partisan.
WHATEVER: yes, you are right. No one is guaranteed retirement. I am looking for a job - I have never planned otherwise. I would be too bored just sitting around as I have been since I have been laid off. My financial planner told me that I would be in better shape if I worked for about 5-7 years more after I go on social security to supplement it. I have no problem with that. So what is the problem? Is it just yours?
Love and kisses - Sharon Cochrane "
have lost wrote on October 13, 2008 4:10 am:
To whatever wrote on October 13, 2008 5:49 am:
BH wrote on October 13, 2008 6:12 am:
revamped education system, then someone is going to have to give up a piece
of their pie so that someone else can have more. "
chicken little the sky is falling wrote on October 13, 2008 12:16 pm:
in theory.... wrote on October 13, 2008 12:25 pm:
Yup wrote on October 13, 2008 1:16 pm:
Outside the Box wrote on October 13, 2008 1:22 pm:
Yup wrote on October 13, 2008 6:41 pm:
psh wrote on October 13, 2008 9:08 pm:
2) These were hardly "risky" investments.
3) If you do not know these people and do not every individual detail, then you are being judgmental and rude. Go back to your bible, judge not lest ye be judged.
Sharon, you go girl. You'll be just fine. "