Turbulent stock market spooks some older workers, retirees

The recent turbulence in the U.S. stock markets is spooking some older workers and retirees, a group that was hit particularly hard during the most recent financial crisis.

There’s no indication, though, that the recent volatility has brought about large-scale overhauls in retirement planning.

“There’s a lot of fear that if you have another event like 2008 and you retire the year before or the year after, you’re screwed. I’m not taking that risk,” says Mark Patterson, a recently retired patent attorney from Nashville, Tennessee. “There’s a huge fear of folks my age that they’re going to run out of money and they’re going to need to rely on the government for help.”

By the time the market bottomed out during the financial crisis in 2009, an estimated $2.7 trillion had been wiped out of Americans’ retirement accounts, according to the Urban Institute. Older Americans, in particular, have had a tough time recovering their losses. The Pew Research Center estimates the net worth of the median Baby Boomer household in 2016 was still nearly 18 per cent shy of where it sat in 2007.

In the two years since Donald Trump’s election, 62 per cent of Americans - and 76 per cent of those 65 and over - don’t believe their financial situation has improved despite the run-up in the stock markets, according to a recent Bankrate survey. Nearly 1 in 5 respondents said their finances have actually gotten worse.

Paul Kelash, vice-president of consumer insights at Allianz Life Insurance Co., says the market fluctuations throughout 2018 look less like the prelude to a retirement savings crisis and more like a return to normalcy after a remarkably steady market run.

As such, he hasn’t seen much evidence of Americans drastically altering their retirement plans. “We get the feeling that folks are getting more comfortable with volatility,” he says.

Patterson, the recently retired patent attorney, gradually began stepping away from his law practice in 2016 - a decision he says was motivated in part by the stress of his job, his relatively stable finances and a “re-evaluation of priorities” after losing his wife of 35 years in 2013.

Now, 68, Patterson says he still has some “discretionary spending” money invested in stocks and riskier assets. But he says he was reluctant to put too much money into a stock market that soared throughout 2017, a decision he says was driven in part by memories of the 2008 financial crisis.

“I can retire in 2018 and not be sweating bullets because I put together a budget and I protected it,” Patterson says. “The thing that the crash in 2008 taught me is that, even though my portfolio was well set up, that was a black swan type of event. Even if you had a balanced portfolio, everything went down.”