Retirement And The Recession: Savings Destroyed For One Out Of Four Older Workers, Says AARP Survey (states, coverage)
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The recession cost me over 400K and left me in sad straits. My retirement went from comfortable to poverty. I just don't have much left. And I went back to work as well. A lifetime of saving and doing without was undone and there's no way I can ever get it back.
That's life and there's not a damn thing I can do about it. Elder care did me in. My parents didn't die on time. I had originally planned to sell my home in 2005 and retire in 2006 but I had to wait. That cost me everything. And then there was the divorce that took half of what was left.
Yes, mistakes were made and if I got a do over, I would change things. But that's all in the rear-view mirror and I have to live with what I have.
Yep, I can definitely relate. But, unlike you, I'm still trying to figure out my next move. I recently read an article that started me thinking... I don't want to drain my retirement funds paying down a mortgage on a home that is underwater and located in a relatively high cost-of-living region. The trade-off is I would lose my down payment and all the cash invested in renovating the home. But I don't believe I will be able to recapture the lost funds before I'm an "old lady." Here's the article that forced me to start focusing on my options: Real-estate nightmare looms for retirees Robert Powell - MarketWatch
Yep, I can definitely relate. But, unlike you, I'm still trying to figure out my next move. I recently read an article that started me thinking... I don't want to drain my retirement funds paying down a mortgage on a home that is underwater and located in a relatively high cost-of-living region. The trade-off is I would lose my down payment and all the cash invested in renovating the home. But I don't believe I will be able to recapture the lost funds before I'm an "old lady." Here's the article that forced me to start focusing on my options: Real-estate nightmare looms for retirees Robert Powell - MarketWatch
Great article and very on target. Major difference between retiring and selling 2007 and prior vs 2009 on. The year 08 was a tweener and depending on the market. The housing bubble bursting has put a number of folks in a bind especially in high housing cost areas where the same percentage market run up created more of an absolute bubble and resulting drop in equity dollars.
Not sure if I am saying it right but a market run up from 150K to 600K is a 4 fold increase over time and yielded more equity up and more loss down than a 4 fold increase from 60K to 240K. The former was a better retirement scenario prior to late 2007 and potentially worse now with a higher underwater dollar possibility.
I've tried to think-out a reasonable, but, hypothetical case for an individual who did all the 'right things over the years, yet still had their savings and retirement plans completely destroyed by conditions that unexpectedly affected many people... through no real 'fault' of their own.
Suppose a 57-year old making $110K per year had $500K in their 401K when the stock market tanked. But, rather than react in a knee-jerk manner and 'miss a recovery, they decided to ride things out ... until at about 50%-down ($250K), they concluded that if they continued to 'ride things out any further', they would lose everything; ... and pulled the plug to cut their losses.
Meanwhile, their $500K house with a $250K mortgage was appreciating at about 8-10% per year. They had hoped it would be worth about $750K by retirement time, so they could downsize to a $300k home, pay off their mortgage and add another $200-$250K to their retirement nest egg... giving them over $1 million ($40-$50K income at 4-5%). But now, their home is barely worth what they owe and declining further ... and they have little hope of paying-off the mortgage, much less 'banking' anything additional toward retirement.
On top of this, their company was acquired and they were 'downsized'. After burning through unemployment, severance and savings (without finding a new job), they were forced to draw reduced living expenses of about $65K plus another $6K in health insurance, from their already depleted 401K account (2-years = $132K from a $250K IRA, leaving $120K balance). Their reduced 401K has grown about 40% over the same period, but is still only worth about $150K ... which, they are no longer contributing to and which, without a new job, will decline another $60K+ next year, leaving them with about $100K towards retirement; plus a $250K mortgage on a house that is now worth less than $250k. Now, instead of $1+ million retirement nest egg, they have only their Social Security of about $20K-$30K, an outstanding $250K mortgage and $100K lifetime backup.
In a nutshell, their retirement future has been financially destroyed, with little hope of recovery ... not by mismanagement or a failure to save, but, by a devastating economic whirlwind that unexpectedly caught most people by surprise.
you can always suppose any situation but more ofton than not its human error and how events were dealt with that determines the out come and not the events themselves.....
"I've tried to think-out a reasonable, but, hypothetical case for an individual who did all the 'right things over the years, yet still had their savings and retirement plans completely destroyed by conditions that unexpectedly affected many people... through no real 'fault' of their own."
Oh gosh, no need for such a detailed hypothetical case. I practice family law and social security disability. Divorce is catastrophic, especially when it occurs several years before retirement and during a recession. Split retirement funds, pension, and bank accounts. Likely paying for two homes until divorce is finalized, then home may be sold at severely reduced payments or (frequently) is foreclosed on because of delinquent payments. If one of the parties was relying on spouse's health insurance, add in full cost of COBRA after divorce. I guess I should note that most of the time, it's one party that decides s/he wants the divorce; with pre-retirees it tends to be the "grass is greener" midlife crisis type stuff.
In terms of disability, a person becomes disabled, unable to work and relies on credit cards and savings until disability application approved. If a hearing is required, anticipate 1-3 years living off of credit cards and savings. Medical bills? Hahaha.
Oh gosh, no need for such a detailed hypothetical case. I practice family law and social security disability. Divorce is catastrophic, especially when it occurs several years before retirement and during a recession. Split retirement funds, pension, and bank accounts. Likely paying for two homes until divorce is finalized, then home may be sold at severely reduced payments or (frequently) is foreclosed on because of delinquent payments. If one of the parties was relying on spouse's health insurance, add in full cost of COBRA after divorce. I guess I should note that most of the time, it's one party that decides s/he wants the divorce; with pre-retirees it tends to be the "grass is greener" midlife crisis type stuff.
In your own experience, is it usually the man or the woman who wants the divorce, or is it about even?
With government cutting pensions to it's employees can the military be far behind. How will Tricare For Life exist if Medicare is cut? Ryans Path to Poverty includes them.
With government cutting pensions to it's employees can the military be far behind. How will Tricare For Life exist if Medicare is cut? Ryans Path to Poverty includes them.
Curious, what is your reference to the government (Fed/State/local???) cutting pensions? Existing? Future? ?
"I've tried to think-out a reasonable, but, hypothetical case for an individual who did all the 'right things over the years, yet still had their savings and retirement plans completely destroyed by conditions that unexpectedly affected many people... through no real 'fault' of their own."
Oh gosh, no need for such a detailed hypothetical case. I practice family law and social security disability. Divorce is catastrophic, especially when it occurs several years before retirement and during a recession. Split retirement funds, pension, and bank accounts. Likely paying for two homes until divorce is finalized, then home may be sold at severely reduced payments or (frequently) is foreclosed on because of delinquent payments. If one of the parties was relying on spouse's health insurance, add in full cost of COBRA after divorce. I guess I should note that most of the time, it's one party that decides s/he wants the divorce; with pre-retirees it tends to be the "grass is greener" midlife crisis type stuff.
In terms of disability, a person becomes disabled, unable to work and relies on credit cards and savings until disability application approved. If a hearing is required, anticipate 1-3 years living off of credit cards and savings. Medical bills? Hahaha.
Good point! -- Late-life divorce and health problems clearly have a catastrophic effect on retirement accounts and plans ... as reported by a large number of folks on CD.
Unfortunately, even without those major events, a lot of ordinary folks are still finding their retirement plans trashed. Some 'fault' may lie with poor financial decisions, but, the economy over the past few years has been anything but, predictable or responsive to traditional answers.
I've tried to think-out a reasonable, but, hypothetical case for an individual who did all the 'right things over the years, yet still had their savings and retirement plans completely destroyed by conditions that unexpectedly affected many people... through no real 'fault' of their own.
Suppose a 57-year old making $110K per year had $500K in their 401K when the stock market tanked. But, rather than react in a knee-jerk manner and 'miss a recovery, they decided to ride things out ... until at about 50%-down ($250K), they concluded that if they continued to 'ride things out any further', they would lose everything; ... and pulled the plug to cut their losses.
Meanwhile, their $500K house with a $250K mortgage was appreciating at about 8-10% per year. They had hoped it would be worth about $750K by retirement time, so they could downsize to a $300k home, pay off their mortgage and add another $200-$250K to their retirement nest egg... giving them over $1 million ($40-$50K income at 4-5%). But now, their home is barely worth what they owe and declining further ... and they have little hope of paying-off the mortgage, much less 'banking' anything additional toward retirement.
On top of this, their company was acquired and they were 'downsized'. After burning through unemployment, severance and savings (without finding a new job), they were forced to draw reduced living expenses of about $65K plus another $6K in health insurance, from their already depleted 401K account (2-years = $132K from a $250K IRA, leaving $120K balance). Their reduced 401K has grown about 40% over the same period, but is still only worth about $150K ... which, they are no longer contributing to and which, without a new job, will decline another $60K+ next year, leaving them with about $100K towards retirement; plus a $250K mortgage on a house that is now worth less than $250k. Now, instead of $1+ million retirement nest egg, they have only their Social Security of about $20K-$30K, an outstanding $250K mortgage and $100K lifetime backup.
In a nutshell, their retirement future has been financially destroyed, with little hope of recovery ... not by mismanagement or a failure to save, but, by a devastating economic whirlwind that unexpectedly caught most people by surprise.
Realistic and folks can argue how much was their fault regarding the investments and planning but it did happen close to that for a number of folks.
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