Faded plans

Baby boomers rethink early retirement

By Joyce M. Rosenberg

Associated Press

NEW YORK -- It was a great notion -- retiring at 55, maybe as late as 60, while still enjoying the same fabulous lifestyle of travel, good food, theater and more.

For many baby boomers, it vanished along with billions of dollars in the stock market or jobs lost in the economic downturn. It turned out their retirement plans were really pipe dreams.

"A lot of them didn't have plans -- their plan was the U.S. equities market was going to continue to rise at 30 percent a year, and they didn't have to worry about it," said Rick Adkins, CEO of Arkansas Financial Group in Little Rock, Ark.

Financial experts have warned for years that Americans aren't saving enough for retirement and that many don't have a clue about how much money they'll need.

Boomers' problem has been arrogance, said Robert Reby, a financial planner in Danbury, Conn. "They said, 'We're smart enough to figure it out, we don't need help."'

But boomers got a rude awakening from the dot-com crash, recession and Enron collapse, and financial advisers say they're now getting serious about retirement planning.

Many would-be retirees ask how they'll make up their losses and whether they'll be able to do so quickly.

Elaine Bedel, a financial planner in Indianapolis, said that unless the market quickly rebounds to its levels of two years ago -- something no market-savvy person should count on -- boomers and people a few years older will have to put more money aside or save for a longer period.

"Now, the question is, 'Am I saving enough?"' Bedel said.

Luckily for those 50 and older, changes in the tax law effective this year allow them to contribute an extra $1,000 to a 401(k) plan and an additional $500 to Individual Retirement Accounts in what are called "catch-up" provisions.

Financial advisers report another positive turn -- a more realistic attitude about investments among many boomers. They're more willing to diversify, and they're no longer turning up their noses at some investments previously seen as boring or too conservative, such as bonds.

Reby suggests boomers open their minds to an old way of thinking -- doing careful research and diversifying. "This is Warren Buffett stuff," he said, referring to the famed investor who has emerged from the stock market downturn with his fortune largely intact.

Tim Mygatt of Danbury, Conn., wonders, at age 62, not only when he'll be able to retire, but also what kind of lifestyle he'll be able to have. He was doing high-tech consulting work, but the slowdown in the business wiped out much of his income. Meanwhile, his investments fell with the stock market.

Mygatt, whose wife is still working, is adapting to the uncertainty by "being more flexible about life and paying for life." For example, the couple sold their house in Westchester County, N.Y., a high-priced New York City suburb, and are renting and not planning to buy. That gives them some time to recoup their losses and more options in deciding where to live.