Stock mar­ket un­cer­tainty has older work­ers on edge

The Prince George Citizen - - Seniors -

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, Tenn. “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 one in five 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.”

In­deed, mem­o­ries of the re­ces­sion con­tinue to take a fi­nan­cial and psy­cho­log­i­cal toll on many of those who were af­fected.

“There is no ev­i­dence that re­tire­ment wealth has im­proved in the last few years,” says Teresa Ghi­lar­ducci, a labour economist, pro­fes­sor and di­rec­tor of the Re­tire­ment Eq­uity Lab at The New School. For work­ers 50 to 65, there are in­di­ca­tions wealth has ac­tu­ally fallen, she said.

Ghi­lar­ducci notes that work­ers and their em­ploy­ers stopped or cut back on 401(k) and re­tire­ment ac­count con­tri­bu­tions im­me­di­ately after the fi­nan­cial cri­sis. Many also opted to “de-lever­age” and pay down debt as the re­cov­ery got un­der­way, she says, which tied up money that oth­er­wise would have been saved or in­vested.

“They had other things to do with their money, even if they didn’t lose their job,” she says. “Sav­ing is sort of a lux­ury good. It’s what you can do when you can pay for ev­ery­thing else.”

And with a lim­ited num­ber of work­ing years ahead of them – and, in some cases, their peak earn­ing years largely be­hind them – many older Amer­i­cans haven’t man­aged to re­plen­ish their de­pleted re­tire­ment and sav­ings ac­counts.

Mark Ham­rick, the Washington bu­reau chief and se­nior eco­nomic an­a­lyst at Bankrate, notes that the Fed­eral Re­serve’s on­go­ing ef­forts to boost in­ter­est rates ben­e­fit savers with money in the bank but also make it more dif­fi­cult for those with debt to pay back what they owe. The “ris­ing eco­nomic tide” has been a boon for many, he says, “but it doesn’t lift all boats.”

He be­lieves there’s a ten­dency to “over­gen­er­al­ize” Amer­i­cans’ re­tire­ment sit­u­a­tions and their day-to-day re­ac­tions to the econ­omy.

Mem­o­ries of the re­ces­sion con­tinue to take a fi­nan­cial and psy­cho­log­i­cal toll on many of those who were af­fected.

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