Tuesday, April 12, 2005

Gambling with retirement

As the nation debates whether stock investments and private accounts are better than plain old Social Security, here's a sobering story:

AROLD AND JOAN SPRADLEY of Springville, Ala., had hoped to retire in 2001. The decline of the stock market that began in the spring of 2000 dashed that.

For two years, they watched their retirement savings - almost exclusively in stock funds - fall by 50 percent (they declined to reveal dollar figures) as the brokerage company handling the money urged them to ride it out. Finally in 2002, they pulled out.

"You get out of it when you can't stand the pain anymore," said Mrs. Spradley, 57, who takes care of the bookkeeping for her husband's computer consulting business. "We had to protect what we had because we didn't want to start back at zero again."

In their mid-50's with retirement on the horizon, the couple changed course. They went to a certified financial planner and developed a long-range plan. Their financial outlook today has much improved, but like so many retirees or those on the cusp of retirement, their lives are different from what they had expected. Whether it was the bull market, ailing pension funds or the demise of high-flying corporations like
Enron and WorldCom, many retirees have had to adjust their plans and start rebuilding their investments.

According to a 2002 survey by AARP of people 50 to 70 years who owned stocks individually, in mutual funds or retirement accounts like 401(k)'s and individual retirement accounts, 77 percent said they had lost money in stocks. Of those who had lost money and were still working, 20 percent said they postponed retirement as a result. Of all retirees who lost money in stock, a third were working full or part time, 3 percent of them returning to work after March 2000.

Read the whole NY Times story

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