July 14, 2002
Stocks' Slide Is Playing Havoc With Older Americans' DreamsBy KATE ZERNIKE
As the owners of an Atlanta advertising agency that billed $40 million a year, Jim and Jan Pringle were featured in a cover article in Inc. magazine asking, ''What's the best time to retire?''
In January 2000, with the Dow well above 10,000, they were confident they had picked the right time. They took more than $2 million they had made from selling their company and bought stocks. Their broker encouraged them to take a month in Europe; instead they moved to South Carolina, where they began building a dream house on the beach.
The Pringles have since lost about 75 percent of their investment. Far from taking any trips to Europe, they have done what they vowed never to do: mortgaged their house and gone back to work.
''I thought I would at least be able to take a break and think about what to do with the second half of my life,'' Mr. Pringle, 63, said. ''But I didn't have a lot of options when the market went south.''
To many Americans, the sustained slide in the stock market -- particularly last week's nose dive -- has been something to fret about, a darkening cloud. But to many people at or near retirement age, it has been a colossal jolt.
People in this age group -- 55 to 64 -- have had almost twice as much money invested in stocks over the last few years as the average American. But if that money took them higher during the boom years, raising their expectations for living easy and dying rich, they have since fallen farther.
Unlike younger investors, older ones do not have room to ride out their losses, particularly those who, while swimming in capital gains, ignored the basic principle of shifting from stocks to less volatile investments as retirement drew near. Perhaps as a result, federal statistics show, the same age group has been entering the work force at a higher rate than any other in the last two years -- or simply not leaving.
In interviews last week from Hawaii to New England, older investors told stories of losing the entire value of their portfolios, of canceling travel plans and scaling back expectations. They used to stand mesmerized outside storefront stock tickers, or glued to CNBC at home.
Now, they are looking the other way.
For these investors, what they thought would be comfortable retirement years are now shrouded in anxiety, disappointment and, in some cases, shame.
One 68-year-old man pleaded for anonymity as he told how he and his wife had sold their home in Manhattan and their beach house in the mid-1990's, planning to retire on the income of about $1 million he invested in the market.
As tech stocks rose, so did his portfolio. He hung on despite losing $4.5 million over two years. But last year, with some of his stocks reduced to pennies, and fearing that he would be ''sitting in the street,'' he and his wife took jobs at the Mohegan Sun casino in Connecticut.
''The market was going up so rapidly, it was easy to live off the appreciated value of your assets,'' he said. ''It was to some extent delusional, thinking this thing would turn around and come back, but it takes a while to come to grips with it. It hadn't happened in my lifetime, that kind of demise. I was born during the Depression, but I wasn't old enough to understand it.''
Jacobo Black, 67, a retired real estate agent in Miami, said that he and his wife, Sophie, had canceled plans for a trans-Atlantic cruise this year. He could have used the distraction from thinking about the market.
''I feel so vulnerable,'' Mr. Black said. ''Here I was with thousands of dollars in savings and here I am losing it like water running through my fingers.''
Gena Lovett, walking along Laguna Beach in California with a group of friends who, like her, are in their late 50's, said that she and her husband, John, 57, would not be able to contribute as much to their grandchildren's education.
''Our retirement is one-half of what it was a year ago,'' she said. ''And because John works for G.E., we have mostly G.E. stock. I suppose we should have diversified, but G.E. stock was supposed to be wonderful. John's simply not looking at retirement. We simply told our kids that we're spending their inheritance.''
The oldest retirees, those over 70, tend to have pensions and so rely less on the stock market, economists say. Those approaching retirement are far more likely to have 401(k) plans, which became the primary retirement option offered by companies over the last two decades. As the stock market swelled in the 1990's, so did those plans, and many people looked at the big gains and thought they could retire early.
''Many retirees became complacent,'' said Mark Zandi, chief economist at Economy.com, a consulting firm in Pennsylvania. ''There was so much money being made, they didn't do the normal shifting most people do. Many of them were putting more in the market, thinking this was a quick way to fund their retirement. They got caught.''
According to Labor Department numbers quoted by AARP, the nation's largest lobbying group for retirees, the number of people over the age of 55 in the work force rose by 8.4 percent, or 1.6 million people, between June 2001 and June 2002, compared with far smaller gains in previous years. Every other age group declined in that period.
''What do you do if you find yourself at retirement age without enough to retire on?'' asked John Rother, AARP's policy director. ''You keep working.''
John H. Saxman, the chairman of the biobehavioral sciences department at Columbia University's Teachers College, said he had begun his career believing that if he set aside money each year, he could retire by 65.
''All I knew was that I didn't want to become one of those doddering old professors who can never afford to leave,'' Professor Saxman said. ''Now I'm 63 and every time I try to think about a specific retirement date, I look at my quarterly reports and realize I can't pick a date yet.''
He said he had grown accustomed to seeing his Teachers Insurance and Annuity Association-College Retirement Equities Fund grow 8 percent to 10 percent a year, until it began posting losses a year ago. His latest quarterly statement arrived a few days ago, but he left it unopened, not wanting to see how much money was gone.
''I get the feeling now it won't be next year,'' Professor Saxman said. ''It may be another five years.''
Many people said they felt cheated at having to postpone their retirement, particularly as every day seems to bring questions about fraud, executive compensation or accounting irregularities at yet another company.
''Obviously the stock market goes up and down, and the crap shoot is whether you're going to retire at the moment that it's up or down,'' said Gail Hovey, 62, who works for nonprofit groups in Hawaii. ''But to have all the accounting irregularities and all the fraud on top of it, it makes you wonder who you can trust.''
''I've worked hard all my life and been a responsible citizen.'' Ms. Hovey added. ''And it's not supposed to be threatened at this point.''
But if the fraud has made people angry, the losses have made some more philosophical.
''I really enjoy controlling my own destiny, rather than depending on the stock market or corporate America,'' said Mr. Pringle, who started an advertising agency with his wife, as they had done 29 years earlier, at their retirement home in South Carolina.
Misfortune has also revealed pockets of pluck. Mrs. Pringle let off an exasperated laugh as she told how she ''retired, supposedly'' but then spoke enthusiastically about the new kind of pretzel, shaped like a golf tee, that she is marketing at professional tournaments. She and her husband have far fewer accounts than they did in Atlanta, she said, but now they work overlooking the beach.
''When we got here, I said: 'Lord, I am just going to come down here, do good by you and do your work. What would you have me do?' '' she said. ''I suppose this was what he had in mind.''