Not So Fast, Would-Be Retirees
STEVE INSKEEP, host:
Investors are trying to take the long view of the financial situation, but many older Americans don't have the luxury of time. NPR's John McChesney reports.
JOHN MCCHESNEY: Seventy-year-old Dave Knight(ph), a retired engineer living in Beaumont, California, exemplifies the financial turmoil that threatens to overwhelm many recent retirees.
Mr. DAVE KNIGHT (Retired Engineer): The stock market continued to fall and the housing prices here have fallen around 25, 30 percent, basically wiped out our home equity. Gasoline went up, food went up, and we suddenly discovered things are looking tight.
MCCHESNEY: Like many retirees, Knight's home value doubled in recent years. So he took out a home equity loan to live more comfortably. He says at the current rate, his retirement funds will run out in three years. So at 70, he's trying to go back to work, teaching high school. Twenty years ago, America shifted from retirement programs that guaranteed a certain amount of income to stock market based programs called 401(k)s. During the good years those stocks soared. Now it's a starkly different story. Robert Sloane(ph) handles government affairs for the American Association of Retired Persons, or AARP. He sites a recent AARP study.
Mr. ROBERT SLOANE (Director of Government Relations, American Association of Retired Persons): Those over 60 hold about 50 percent of all equities in the United States. And between October of 2007 and September 23, when this was produced, the value of those equities had fallen 23 percent.
MCCHESNEY: That figure, of course, doesn't include the most recent Wall Street meltdowns. Alicia Munnell of the Center for Retirement Research says retirees fell into the same trap that caught so many younger people.
Dr. ALICIA MUNNELL (Director, Center for Retirement Research): We've just completed a study that showed that what older households did was, to feel rich during the boom, borrow against their housing equity, spend a good chunk of that money. And so they're now entering retirement with more debt on their balance sheet and not the assets to show for it.
MCCHESNEY: Sixty-year-old Rob Wood(ph), a Web developer who lives just south of San Francisco, hasn't touched his home equity or his retirement funds, but he's still very uneasy.
Mr. ROB WOOD (Web Developer): All the money we have set aside for retirement is either tied up in our home or an IRA, which all of a sudden, it looks like we're breaking even right now. So we don't have any money for retirement.
MCCHESNEY: Wood says he can't plan on retiring any time in the foreseeable future.
Mr. WOOD: What bothers me about the economic situation we're in is that I don't have any choice.
MCCHESNEY: Right now, the average American chooses to retire at age 63. The advice of experts today: Forget it, keep on working. And so far, we've been talking about people who are lucky enough to have homes and investments. But most Americans have saved very little for retirement according to the AARP's Robert Sloane.
Mr. SLOANE: The average nest egg is frighteningly small. It can be as little as $50,000. And in some cases people don't even have that.
MCCHESNEY: Only half of Americans have any kind of private sector retirement plan, making Social Security even more important as the big wave of baby boomers begins to retire.
Mr. EUGENE PERRY(ph) (Retiree): I even dreamt it at night. What am I going to do? What's going to happen if I lose it all?
MCCHESNEY: Eugene Perry is 84, lives in a retirement village in Petaluma, California, and should feel secure. But he doesn't because of his dwindling 401(k) which goes to show just how deep the fear runs amongst retirees these days.
Mr. PERRY: I thought I was set here to my dying days, my wife and I. Greedy management hurts people. Taken from us little guys what we'd dreamed of. I'm 84 years old, and I have to still worry?
MCCHESNEY: John McChesney, NPR News.