Most people who are in their mid to upper 60s have planned for retirement for some time. Individuals who did not and who put all of their faith into social security or even pensions being their post-employment salvation may have turned to other investments to create a sizeable retirement nest egg. Now that they’re thinking of saying good-bye to work, people are finding that nest egg has diminished thanks to the failing economy and plummeting stock market. According to Congress’ top budget analyst, Peter Orszag, Americans’ retirement plans have lost as much as $2 trillion in the past 15 months.
While the American stock market has had it’s share of history-making ups and downs, the financial crisis of September and October 2008 sent shock waves through the financial markets on a number of occasions. The Dow Jones Industrial Average lost several points and reached lows the public has not seen since after the terrorist attacks on September 11, 2001. Individuals who put their faith in investments, including 401(k) plan have been wondering what to do.
Mike Walden, an economist in North Carolina, has said that soon-to-be retirees should start thinking about their options. With no prediction of just how low the low will be, some are choosing to pull out of the market. Others are diversifying their portfolios so that they do not take a large hit in any one sector. Many others are scared and confused and are really not sure what to do.
Financial advisors tend to agree that diversification could be the answer to help ride out the storm. Workers should especially not put all of their eggs in one basket by buying company stock solely, and should also consider less volatile investments. Those who take a hands-off approach to their retirement portfolio may want to pay closer attention to how funds are doing.
A recent study by the AARP revealed that one in five workers 45 and older has stopped putting money into a 401(k), Individual Retirement Account (IRA) or other retirement savings account during the past year, thanks to the economic upheaval. Nearly one in four has increased the number of hours he or she works to boost savings, or simply to pay for the rising cost of many household necessities.
For some, financial advice has come too late. Many would-be retirees are saying that this financial upheaval has simply pushed out their retirement plans. Diminished savings or investments are forcing them to continue with the status quo on the job.
“Some people will delay their retirement. In particular, those on the verge of retirement may decide they can no longer afford to retire and will continue working,” Orszag says.
However, there is the nagging anxiety of whether their jobs will remain stable through what is proving to be the start of a recession. Unemployment rates are inching up, and some fear that they could lose their jobs to younger workers who are willing to do the same work for less pay. Those who believe that federal age discrimination laws will protect them from such an event have not examined the ineffectiveness of discrimination laws in the past which projects equal or less effectiveness in the future.
Soon-to-be retirees must decide that, in reality, retirement has become one of the lesser options on the table and that retirement plans previously made should be either drastically amended or abandoned all together. The elderly in America are destined to work until their health will no longer allow it. Many companies have discovered that the older, more experienced worker adds very welcome maturity and customer service/product knowledge to a workforce and are eager to discuss work schedules with the older applicant.