Baby Boomers: Crushed Retirement Dreams

Those nearing retirement adjust to dashed dreams and diminished portfolios

Randy Kamen Gredinger and her husband, Martin, had big dreams for retirement. The couple had talked about taking a trip around the world or maybe spending time in Asia or Africa.

Then came the market downturn in 2008, which erased 25% of the Gredingers' savings.

With two children in college, their immediate concern turned to cutting costs so that they could cover tuition expenses. “We had the lion's share of college covered before the crash,” Mr. Gredinger said. “Now we don't.”

The Gredingers, both 59 and making six-figure salaries — she's a psychologist and he's a certified public accountant — still plan to retire, but probably later than they had envisioned and well past the customary retirement age of 65. And when they stop working, their travel itinerary probably won't be as extravagant as they had hoped.

“I love what I do, but the challenge for me is coming to grips with the fact that we have to work, rather than thinking of it as a choice,” Ms. Kamen Gredinger said.

The retirement dreams of many baby boomers like the Gredingers were based on having a solid nest egg consisting of ever-appreciating stocks and real estate.

The financial crisis cracked the egg.

And while stocks have made up some of the losses sustained in 2008 and early 2009, and housing values show signs of stabilizing, employment is still sluggish, and it may take a while for many boomers to recover financially and regain the confidence they had as they looked forward to their golden years.

So, boomers are making adjustments.

Forty percent of workers 45-59 now expect to retire later than they did before the market downturn, according to the Center for Retirement Research at Boston College. Most of these workers intend to delay retirement by four or more years.

Fifty-five percent of workers 45-64 are postponing travel, according to a January survey by AARP; 68% are reducing spending on entertainment.

Some are cutting back on necessities — 17% said they are reducing medications. Eight percent have taken on a second job, while 19% have increased the number of hours they work, according to AARP.

“People are really husbanding their resources and trying to save more,” said Alicia Munnell, director of the Center for Retirement Research. “Some are trying to work longer, but unfortunately, the financial crisis was accompanied by a dramatic decline in economic inactivity.”

While the Gredingers have partially replenished their savings, thanks to the market rebound, they also have taken steps to cut expenses.

Mr. Gredinger has encouraged his son to sign up for a work-study program and apply to be a resident adviser so he'll get room and board for free.

Ms. Kamen Gredinger has cut back on her shopping trips. She used to have so many designer shoes that her husband once placed them around the entire exterior of their home, just to make a point. Now if she buys one pair a year, that's a lot, she said, and she won't set foot in Bloomingdale's unless there is a sale going on.

Ms. Kamen Gredinger is also considering doing volunteer work abroad so they could travel at a discount, she said.

For some, postponing retirement is not an option — even if it means living a more frugal lifestyle than they had imagined.

John Buchter, 63, and his wife, Roberta, 65, proceeded with their plans to retire to Savannah, Ga., last year even though it could mean living on a shoestring budget for the rest of their lives.

“My father passed away at 58 and never had an opportunity to retire,” Mr. Buchter said. “So I had retirement in my mind since I was 50.”

The Buchters relocated from Reading, Pa., where Mr. Buchter worked in the steel industry. They chose Savannah because it has a warm climate and they can live there inexpensively.

Today the Buchters are living off the $2,600 a month they get in Social Security payments. They have agreed not to touch Mr. Buchter's 401(k) account for four years in the hope that it gains back the 15% it lost during the market crash.

As a result, the couple is more careful with money. They try to walk rather than drive to save on gas. And they buy generic brands at the grocery store.

“Sure, we would like to be more carefree with money, but I don't miss anything,” Ms. Buchter said.

Financial advisers and experts are worried, however, that many baby boomers, like the Buchters, are tapping into their Social Security accounts too soon.

Forty percent of 62-year-olds eligible for Social Security are taking it, according to AARP.

“Taking Social Security at 62 makes sense for those people who have shorter life spans, but that is not 40% of the population,” said Jean Setzfand, AARP's director of financial security.

Financial advisers said they are spending more time managing baby boomers' expectations.

Michael A. Masiello, a financial adviser with Masiello & Associates Estate and Wealth Preservation Council LLC, is seeing a number of new baby boomer clients who are struggling with how they are going to live off their retirement savings.

“We tell clients what they need to hear, not what they want to hear,” Mr. Masiello said. “I keep a box of Kleenex on the table.”

Many of these investors understand that the notion of retiring at 65 is more the exception than the rule, said Steven Brett, president of Marcum Financial Services LLC, which has $400 million in assets under management.

“Some of them will have to take on third or fourth careers,” he said.

But for those baby boomers who lost their jobs, finding new ones can be challenging.

Larry Benson, 53, was laid off from his job as a graphic designer at SEIU United Healthcare Workers-West in February 2009 after only 11 months.

Before that, he had been a freelancer. Since then, he has been sending out four or five résumés a week — but has been on only one interview.

“I don't know if it's my age or because I am competing against so many people,” Mr. Benson said. As for retirement, he is relying on the value of the house he shares with his partner, Rick Fitzgerald.

They bought the four-bedroom house in Oakland, Calif., for $400,000 in 2001 and figure they could sell it for $500,000 today if they had to.

“I used to think that I would retire when I could still move around — maybe in my mid- to late 50s,” Mr. Benson said. “Now I don't think I will ever retire.”

Mr. Benson isn't alone. Fourteen percent of baby boomers have lost their jobs since the market downturn, according to AARP, and 27% have had their hours or pay cut.

As a result, many baby boomers are cutting out things that could help them save for retirement, experts said. For example, only 27% of baby boomers are consulting financial planners.

“They see it as another expense they have to pay for,” Ms. Setzfand said.

In fact, a number of baby boomers interviewed for this story said they have stopped seeing financial advisers as a result of the market crash.

Doreen Orion, 50, and her husband, Timothy Justice, 52, fired their financial adviser after the market crash and decided to handle their investments themselves.

“Since we did just as badly as everyone else, we wondered why we were paying someone else to do it,” she said.

But some baby boomers, such as the Gredingers, are making a point to check in with their advisers periodically to make sure they can still meet their retirement goals, even if they are not as lofty as they once were.


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