Boomers see retirement slip farther away

DETROIT - A decade ago, boomers felt they had the map to early, cushy retirement. Then they watched their fortunes die along the side of the road.

Talk to nearly anyone from the baby boom generation - whether they are 48, 55 or 62 - and you'll hear how they got clobbered when their company cut jobs or how they panicked when the market tanked and sold investments at rock-bottom prices - and how they can't believe the numbers on their financial statements now.

"The baby boomers are freaked out. They're just freaked out," said James Jenkins, president of Jenkins & Co., an accounting firm in Southfield, Mich. He has seen clients go from having $1 million in a retirement plan to half that - and then lose a job on top of that.

So instead of sliding comfortably into their next phase of life, many boomers find themselves aging anxiously.

Diane Fernandez, 58, tears up talking about how things are, compared with how she imagined they would be at this point in her life.

"People don't want to talk about it," she said. "They're too proud."

Fernandez lives in Ferndale, Mich., still has a mortgage on her home and drives a car with a sign slapped on the door that says: "How's Your Economy? What's your Plan B?" It's a marketing effort for health-oriented skin care products, but the sign also describes her life - and the lives of so many others who thought just a few years ago that they were at or near retirement.

After all, in the late '90s, making money was as easy as buying a house, or mailing a check to a mutual fund or setting a little extra aside in your 401(k). Soaring real estate prices and double-digit gains in the stock market led many to feel they would be set to retire in their 50s.

"You saw some people making money they never dreamed of," said Bill Stewart, principal and chartered financial consultant for Rehmann, a tax consulting and financial service firm in Troy, Mich.

And then the world turned upside down.

About $17.6 trillion in U.S. household net worth vanished, if you compare wealth in the second quarter of 2007 with the first quarter of 2009, according to Federal Reserve data and Moody's Analytics. That's a 25 percent drop. Put another way, the data show Americans lost about five years of value. Their wealth fell back to 2004 levels.

According to Moody's Economy.com, the net worth of the baby boom generation dropped about 25 percent from the end of 2007 to mid-2009, from $30 trillion down to $22.6 trillion. While it is now growing slowly, boomers were still out about $5 trillion in the first quarter of this year.

Though the stock market has rallied, many Americans are even worse off, and the net worth of U.S. households is still down nearly $11 trillion when compared with early 2007.

For many boomers, there is no other choice but to take Social Security benefits at age 62 - instead of waiting for full benefits at 66 - just to have the cash to cover expenses, said Michael J. Astrue, commissioner of Social Security.

It's not a place where many boomers imagined that they would be. The trouble with going through an economic boom - such as the tech bubble or the housing boom - is that it can fool you into thinking you don't need to save.

When boomers were in their 40s, what should have been their prime saving years, they looked at rising stock and home values and thought they were set for life, said Mark Zandi, chief economist for Moody's Economy.com. But they actually needed to be saving more and borrowing less.

"The timing of the tech boom, from that perspective, was very unfortunate for the boomers," Zandi said.

All that inflated wealth disappeared in severe back-to-back bear markets.

On top of that, many boomers have depended on themselves - not an experienced money manager - to turn their fortunes around.
Some heeded the advice of commentators such as Fox News host Glenn Beck, who often told listeners to get out of the markets and buy gold.

"He urged people to sell precisely when stocks were at rock-bottom levels," said Eric Tyson, who wrote "Personal Finance for Dummies."

And many boomers got hit with the extra whammy of losing jobs or taking pay cuts in what should have been prime-income years, making it impossible to save for retirement.

"Right now, I have nothing," said Lawrence Jackson, 52.

Jackson spent what retirement savings he had paying bills when he was out of work. He also invested about $5,000 in his own business, Pinnacle Contractor Services in Detroit, which offers business support to building-trades contractors.

Jackson had a fairly stable career in banking until 2000. Then he would get a job and get hit by cutbacks.

He worked at Michigan National Bank, First Independence Bank, First of America and later for a fund that specialized in making loans to nonprofits. He had been making about $70,000 a year.

Now, he's making about $50,000 a year at the Downriver Community Conference in Southgate, helping people get loans from the U.S. Small Business Administration.

Half of his pay after taxes each month goes toward the $1,600 mortgage payment on a house in Belleville, Mich.

He jokes that he won't be leaving his wife, Cynthia Nichols-Jackson, because she has more retirement savings. A nurse at the University of Michigan hospital, she also pays the $700-a-month bill for the second mortgage on the home, which the couple bought in 1997 for $250,000.

"The house across the street just sold for $99,000," Lawrence Jackson said.

He maintains a good sense of humor but doesn't laugh when he says he might need to work until 70 or 75.

"God willing, if I'm healthy, I'm going to keep going," Jackson said. "I can be scared or get worried, or I can just keep working."

As a bankruptcy attorney in Detroit, Walter Metzen, 47, has seen boomer engineers who can no longer find jobs that pay $100,000, and older couples who got into trouble buying a bigger home.

"There's a lot of people who were hoping to retire but basically can't," Metzen said. "You've only got 10 good working years left, and you don't even have a job."

When Fernandez retired after 25 years with the phone company, she didn't intend to quit working. Six years ago, she took her pension in a lump sum and invested it with a financial adviser.

Losing money as stock prices tumbled, she thought she could do better by picking up rental properties in metro Detroit on the cheap. But now she wonders how long she can keep them.

Her original Plan B was to make money on investments - plus a few thousand dollars a month as a massage therapist.

"I envisioned this flood of people," Fernandez said. "And it just didn't happen."

(c) 2010, Detroit Free Press.

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