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Baby Boomers Scramble to Reassess Future

What to do when your retirement disappears before your eyes

By Mark Huffman
ConsumerAffairs.com

October 20, 2008

Personal Finance • Study: Four Types Of Consumers Emerging From Recession • States Worry About Federal Preemption In Consumer Bill • Job Cuts Continue To Fall In October • Consumer Confidence Dips in October, But Rises for Holiday Season • Is The Recession Over? • Economy to Affect Two-Thirds of Families This Holiday • Fed Sees Improvement In US Economy • Consumer Prices Rise Slightly In September • Attorneys General Back Consumer Financial Protection Agency • Gold And Stocks: Are Both Dangerously High? • Study: Americans Crave Better Financial Knowledge • Hiring Begins To Emerge Even As Companies Shed Jobs • Economists Say Worst Of Recession Over • Economy May Force Early Retirements • White-Collar Workers Hit Hard By Recession • Fed Sees Recovering Economy • Six-In-Ten Workers Live Paycheck To Paycheck, Survey Finds • Seven Steps To Saving Money • Survey Suggests Improvement In Jobs Outlook • Stocks Still Outperform, Researchers Claim • Employment Prospects Brighten For Jobless Americans • Job Cuts Rise Following 15-Month Low • Little Sign of Inflation on the Horizon • CFA Applauds Plan to Strengthen Key Investor Protections • Consumers Fall Further Behind On Loans --- • More Personal Finance News

The events of the last 30 days have been unnerving for almost everyone, but perhaps no more so than to the nation's baby boom population, just beginning to prepare for retirement.

Many have their retirement savings in stock portfolios, which in some cases have lost nearly 50 percent of their value in the last few months--much of it in the last few weeks. Granted, these are paper losses, and the stocks could regain their value. But that can take years, and for many boomers, who are unaccustomed to waiting for much of anything, time is something for a luxury these days.

The stock market lost 27 percent of its value between September 30, 2007 and September 30, 2008, a roughly $7 trillion drop. The Congressional Budget Office recently reported that equity losses in Americans' retirement accounts totaled $2 trillion in the last 15 months. But now is hardly the time to sell stocks, as many shares are at their 52-week lows.

"The slumping stock market, falling housing prices, and weakening economy have serious repercussions for older Americans who are approaching retirement or already retired," said Richard Johnson, a retirement expert at The Urban Institute, a Washington, DC think tank. "Seniors have little time to recoup the values of their homes, 401(k) plans, and individual retirement accounts--all important parts of their retirement nest eggs."

While older adults are staying in the labor force longer to bolster their retirement incomes, a looming recession with the prospect of rising unemployment may limit their opportunities.

The tanking of the real estate market is also hitting boomers especially hard. For many, escalating home values have been a major source of their wealth. From 1998 to 2006, the median home equity for Americans age 55 and older jumped by 42 percent. Many planned on tapping that equity for retirement.

But they may have to wait a while before they can do that. According to the Office of Federal Housing Enterprise Oversight, the average home value fell 3.9 percent in just a little over a year. Boomers who happen to live in one of 20 metro areas that enjoyed the highest price appreciation have been even harder hit, with prices declining more than 16 percent over the same period.

Remaining in the labor force may be a boomer's best bet for maintaining their income. But a significant downturn could lead to downsizing, or of firms going out of business altogether. New York City is bracing for the loss of as many as 160,000 because of the collapse of many banks, brokerage firms and hedge funds.

Finding a new job could be tougher, since firms may cut back on hiring during the downturn. Many retirement experts say boomers contemplating retirement but worried about losses to their retirement accounts should keep their present jobs for longer than they planned, if at all possible.

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