Six years ago, Paul Nelson gave up his long career in the defense industry for what he thought would be a peaceful retirement in Tucson. The weather was mild, the neighbors friendly. He had plenty of time to volunteer and garden.
But retirement hasn't worked out the way he planned. In 2006 his wife of 46 years died unexpectedly. He tried to swap their house for a smaller one and lost a chunk of his retirement savings in the process. Then this year the stock market cratered, wiping out almost everything he had left. Now the 71-year-old is looking for work at local hardware stores and Home Depot (HD) and contemplating filing for personal bankruptcy. "I have nothing left," says Nelson, a former Raytheon (RTN) engineer. "I am not alone, I think."
Far from it. An increasing number of people who retired in recent years, confident they had set aside enough to live on comfortably, are finding themselves strapped. The stock market plunge and the housing downturn have affected many Americans, of course. But retirees have been particularly pinched because their homes and investments are the primary assets they depend on for income. As a result, many of the country's elderly are finding themselves in Nelson's situation, low on money and looking for work. "Suddenly the rug has been pulled out from under them," says Alicia H. Munnell, director of the Center for Retirement Research at Boston College.
ANGRY AND BETRAYED
These are The Unretired. Seniors who thought they were set for life just a year ago now face the prospect of going back to work for two, five, even 10 years. They're sprucing up their résumés, calling old work contacts, and flocking to employment sites. There are no reliable stats yet on how many retirees are looking for work, but there are clear signs the number is growing. RetirementJobs.com, the largest career site for people over 50, saw traffic more than double, from 250,000 visitors in July to 600,000 in November. In April, before the worst of the market downturn, a survey conducted by the seniors group AARP found that 17% of responding retirees over 50 were considering or already going back to work.
These aren't just the spendthrifts or sloppy planners you would expect to run into trouble in retirement. Interviews with 35 of The Unretired show that many are people who did everything they were supposed to do—working for decades and regularly socking money away. Floyd McCoy, 67, retired three years ago after working for IBM (IBM) for 22 years and running his own consulting firm. But his $400,000 in savings has dropped 40% this year, and the value of his Weston (Conn.) house is down by a third. McCoy says he can't afford to keep the house he and his wife built 25 years ago for retirement. "I never knew life could be as challenging as this," he says.
The problems are compounded by a weak economy, with companies shedding jobs rather than hiring. Many retirees have been looking for months without luck. Their search is complicated by what some feel is a general reluctance to hire seniors, who may need extra training or extra health care. Gordon Scott, who lives in Solomons, Md., retired last year after 39 years as a police officer and teacher. With his savings down 30%, Scott started looking for a job and attended orientation for nursing school. "I was disappointed with my reception," says the 61-year-old. "You're viewed differently. I can pick up the signs."
Peter Fay, like many of The Unretired, feels angry and betrayed.
The 63-year-old built up a $1 million retirement account as an executive at companies including Chiquita Brands International (CQB) and then at his own high-end flooring company in Scottsdale, Ariz. But with all his money in stocks, he's lost 50% of that this year, at the same time that his house has tumbled in value. He's drawing down his savings and applying for jobs at Lowe's (LOW), Home Depot, and Costco (COST). "All the systems we grew up trusting during all those years of work—you save your money, you trust in the government—are no longer valid," he says.
Retirees have been squeezed during past economic downturns, of course. Their stocks tend to get hit, and returns on fixed-income holdings slide as interest rates are cut to stimulate the economy. But there hasn't been this kind of sharp decline in stocks and home prices at the same time since the Great Depression. In addition, more retirees have exposure to the stock market than in the past because companies have moved from traditional pension funds to employee-managed retirement accounts, such as 401(k)s, which tend to include stocks. A Vanguard survey of clients aged 55 to 64 at the end of 2007 found that two-thirds of their retirement funds were in stocks. "A lot of people invest by themselves, and they aren't aware of all the risks," says Benjamin H. Harris, senior research associate at the Brookings Institution.
Congress held hearings on the issue of retiree security in October. Some politicians say the government needs to get involved soon. "We can't allow the promise of a secure retirement to become another casualty of the financial crisis," says U.S. Representative George Miller (D-Calif.), chairman of the House Education & Labor Committee.
Paul Nelson certainly thought he'd had the kind of long, stable career that would lead to a comfortable retirement. As an engineer at Raytheon, Honeywell International (HON), and Hughes Electronics, he helped develop the manufacturing processes used to put together circuit boards and aircraft products. "I am, like a lot of engineers, detail-oriented," Nelson says. That thoroughness led to managerial roles and plum assignments. He and his wife moved often, living in Minnesota, California, and Colorado before settling in Claremont, Calif. They lived at the foothills of the San Gabriel Mountains for 20 years and raised a daughter there.
When Nelson had an opportunity to retire early at 61 after Raytheon purchased Hughes in 1997, he jumped at the chance. He took his pension as a five-year payout and went to work for Eurostep, a consulting firm involved in a project he'd begun at Hughes. Five years later, at 66, he retired for good with about $500,000 in his retirement accounts. He and his wife started looking for a place that wasn't as expensive or smoggy as Los Angeles. They settled on Tucson in 2004, partly because Nelson was an avid stamp collector, and the Southwestern city was home to the nonprofit Postal History Foundation. For 30 years Nelson had collected stamps as a hobby and published newsletters about them. The couple used the money from the sale of their house in California to help buy a five-bedroom, one-story home in an established Tucson neighborhood with a country club.
Nelson didn't spend his time on the golf links, though. He joined the board of directors of the Postal History Foundation, working on one of its programs that uses stamps to teach children about history, government, and the world. He also spent time visiting his daughter and grandchildren in Minneapolis, gardening, and getting to know people in his community. "I don't know how I found time to work," jokes Nelson.
In July 2006 his wife was diagnosed with leukemia. "
She wasn't feeling well for a month or so, but didn't want to go to the physician," says Nelson. "Then she felt bad enough that we went to the emergency room, and that was the end." Eight days after the diagnosis, his wife died. The following March he put the house on the market and bought a three-bedroom place. He only put down 10%, even though that meant a higher mortgage, because he expected to sell his other house quickly and put down more.
But the local real estate market suddenly started cracking. "The market waited for Nelson to make a stupid move," he says. Three months later, he cut the price on the house he was selling. Other cuts followed as the market spiraled down. "We didn't get any offers that year. People were cautious," says Nelson. "We would get lookie-loos, and then the market would drop again, and we would lower the price." As the problem dragged into the summer, Nelson decided to put his second house on the market, too.
To cover both mortgages, he dipped into his savings. He started looking for a job, signing up for online employment services, including Monster.com (MNST). He got no responses beyond interviews with placement services. Then Wall Street began its slide last fall, and the savings in his retirement accounts started draining at an alarming speed. Nelson stopped eating out and canceled his newspaper, magazine, and cable subscriptions. "I cut back on everything I know to cut back on," Nelson says. He applied to retail stores but found they weren't hiring because of the downturn.
Finally, this spring, one family offered to pay the current asking price on the bigger house. It was about $400,000 less than Nelson had listed it for originally, but he jumped at it. He took his second house off the market briefly, thinking he could refinance it. "But by then, I didn't have anything to use as credit," he says.
Over the summer, Nelson realized the precarious situation he was in. He met with a bankruptcy lawyer in June, though he hasn't decided whether he'll file for protection from creditors. "I am paying the bills, but not the mortgage," he says. His real estate agent is negotiating with the bank to sell the second house to a prospective buyer for $80,000 less than the mortgage, he says. If his bank agrees, Nelson plans to move into an apartment and find a storage unit for some family furniture that's precious to him.
These days, Nelson says he is living off of his monthly Social Security check of $1,700 and has no savings left. Nelson talked to his daughter and son-in-law about moving near them in Minneapolis. But he worries that things are tough for them too, since they're both self-employed. "I am clearly torn," he says. Since his daughter also has three kids and doesn't have an extra room, he has to rent an apartment, whether it's in Minnesota or Arizona. "I am pretty tense," he says. "It's going to be a struggle."
With Susann Rutledge
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