Wall Street Crushes Retirement Planning
A former economics journalist and recent retiree, Robert Lyle was caught short with too much of his savings in stocks. Now his retirement income is much less than what he had planned for. He wishes he had an old-fashioned pension instead of a 401(k).
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LINDA WERTHEIMER, host:
Commentator Robert Lyle belongs to an interest group of sorts, but not one that has benefited lately from the American economy. He's a retiree. His career was as a journalist covering international finance, but that experience did not help him much in getting ready for his own retirement.
Mr. ROBERT LYLE (Commentator): When my company rolled out its 401 investment funds, I thought, what a great idea. I was sure I could do better than the old guaranteed pension, and for a decade or so, I did. Our retirement savings grew faster than we could have ever hoped.
By 2000, I thought we had secured our retirement. And of course, we couldn't get completely out of stocks; that's where the money was being made.
But the first generation of 401 retirees was in no way prepared for this tsunami of a financial crisis. Suddenly, our income has dropped nearly 70 percent. We don't have time to rebuild the value of our investments. We have to worry about next month's bills. How can we afford our mortgages, or the real estate taxes, which are still based on inflated property values? How do we buy, well, anything?
We've already made the obvious budget cuts - magazine subscriptions, cable TV, eating out, movies. We have basic telephone service now. We switched off the air conditioner, and that's something here in South Florida. We even turn off the water heater at times. We're seeing lots of garage sales lately, and some folks around here have even sold their possessions to pawn shops.
Yes, thank goodness, we still have Social Security; we won't starve. But our retirements were based on our 401 savings making up the difference between Social Security and the cost of living. Some of us could lose our homes. Many of us are trying to sell them now. And many of us must go back to work.
I never fully stopped working, but now I have to make a living again. The question is, how and where? With jobs disappearing by the thousands, there aren't any help-wanted signs out, especially for seniors. We still have an underlying optimism that somehow we'll get through it, although I'm not sure how.
But we are a warning to the next generation. If you think you'll be able to rely on the market alone to protect your retirement savings, you'll be in even worse peril than we are.
MONTAGNE: Commentator Robert Lyle is now a semi-retired financial journalist in Florida.
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