In the past 15 months markets siphoned 2 trillion from US retirement accounts.

This figure was when the DOW was at ten thousand. It is below that now. However, over time no doubt the value will recover but the problem is that people may need to draw out funds soon if they are retiring. Thus some are deciding not to retire yet. Both home ownership and private pensions may be turning into an American nightmare rather than an American dream.

"Retirees running out of time
Today's economic crisis is tomorrow's nightmare for millions of agingAmericans whose nest eggs are suddenly cracked.
By Ted C. Fishman
USA TodayOctober 23, 2008
In early October, on one of the days the stock market was falling to whereit was 10 years ago, I called my plumber in Chicago, Gil Boersma, to stop adrip in my sink, but he had another leak on his mind. Unlike "Joe theplumber" made famous in the last presidential debate, Boersma does own hisbusiness and, at 66, he is seeing his retirement fund dwindling. Made up ofmoney he had saved in cash and certificate of deposits, the fund wasrejiggered four months ago by a financial adviser to take advantage of the"income opportunities" of stocks. I caught him just as he was consideringhis next move."I thought I'd retire soon," Boersma said. "Now I'll keep working." Hepaused for a minute to consider the lot of his generation. "Americans needto see a total of all the retirement savings that have been lost in thismeltdown."The next day, when the Dow Jones Industrials were around 10,000, theCongressional Budget Office obliged with the figure: In the past 15 months,the markets have siphoned $2 trillion from U.S. retirement accounts. Thenumber leaves out trillions of dollars in assets that vaporized outsidethose accounts. The CBO also affirmed that many Americans will be forced toput off retirement.One of the sobering realities bared in the crisis is how the public andprivate guardians of our financial lives have long oversold the promise ofstock portfolios as the economic bedrock for our later years. Stocks havenever been the long-term wealth builders championed by the financial press,brokers, financial planners and even our political leaders.In Warren Buffett's 2007 letter to his investors, he dissects the voodooeconomics of mainstream retirement strategies. Most investment pros tellclients the stock market has reliably delivered returns of 10% or better toinvestors willing to stick it out for the long term. Over the century endingin 2007, which Buffett notes has been a very good century for investors, theDow Jones Industrials have delivered a compounded annual return of only5.3%. If you trade a moderate amount and pay commission, taxes or invest inmutual funds or other vehicles that demand small fees, you'll earn far lessin the long run.The waiting gameWhether the stock market delivers for your retirement depends very much onwhen you need to draw down the money you have invested. If you retire thismonth and move your money from stocks - money that over the past 10 yearshas delivered less than nothing in profit - into safe, but meagerlylucrative investments to preserve your nest egg, you might never get closeto whole. People who, late in their working careers, invested theirretirement money in stocks during the bear market of the late '60s and '70swere similarly trapped, because stocks didn't begin to move meaningfully upuntil the early '80s. Back then, conventional wisdom preached that prudentpeople exit stocks when they exited the workforce. Prudence is a bitter pillwhen one has to lock in big losses.Today, Americans live longer they did 30 years ago. Among husbands and wiveswho are both 65, for instance, there is roughly a 50-50 chance one will liveto 95. In recent years, financial advisers commonly told their retiredclients that unless they kept a good chunk of money in the stock market -and less in bonds - they risked running out of money in their frail old age.But history also shows that bear markets can also send stocks backward foryears.Of course, most retirees have to pull out money to live on. Most of us,unlike Buffet, occasionally need that cash to pay for things we requirebefore retirement, such as health care, education, care for a fragile parentor to pay bills between jobs. In the past year alone, one out of five U.S.workers stopped contributing to retirement plans because of financialhardship. Today, workers in retirement are required to pull money from theirtax-deferred retirement accounts, forcing them to cave at the current whimsof the market when they might otherwise choose to hang on. People near or atretirement realize the need to work. The fading of retirement security inthe U.S. is reflected in a recent AARP survey. Sixty-nine percent ofAmericans said they expect to spend less time in retirement.Workers are willing to work longer because they have to, but will employershire them? A higher percentage of Americans older than 65 is working than ageneration ago. Yet, in an economic downturn, companies are likely to try todrive down the age of retirement with employee buyouts, not push it up. Inthe past year, unemployment among workers 55 or older climbed 30%.Better incentives to save would help create a firmer safety net. The currentcrop of self-directed plans, such as IRAs and 401(k)s, do not encouragepeople to save enough to get through the multiyear economic lulls we know toexpect.In the Netherlands, the vast majority of workers are forced to save on thejob, and the system leaves the population on solid footing. The World Bankadvocates mandatory savings. Participants in traditional, defined-benefitpension plans are sleeping far easier than their self-directed peers. We cansteer the self-directed into hybrid financial tools that allow individualsto simulate the security and steady income of the defined-benefit plansstill available to employees of the government and many large corporations.Such tools exist today for individuals, but the high cost in fees andcommissions erodes their value.Keep seniors employedFostering a job market that allows older workers to stay active a few moreyears could make a huge difference. People who earn money in their 60s, 70sand beyond will not need to draw down their savings. And, they can ride outthe longer downturns to give markets a chance to bounce back.Finding work for millions of aging Boomers requires new thinking. My plumberowns his business, is in good health and has loyal customers, so he can keepgoing. One in six older workers is self-employed, but many risk all to starttheir businesses, and many fail.A support system for older entrepreneurs might boost the success rate.Micro-lending circles could spread the risk and expertise. Salaried jobsthat offer flexible and reduced hours could keep older workers employed. Agediscrimination hurts such workers, but some differentiation could also helpthem stay employed. If a 67-year-old makes five sales calls for every 10made by a 27-year-old, then perhaps the older worker's pay could be adjustedaccordingly.The presidential candidates have dodged the big questions on how they'dhandle the financial meltdown, ignoring altogether the plight of tens ofmillions of people in or near retirement. They dwell instead on tax breaksthat would deliver little to most families and less to people winding downtheir work lives.Time to call my plumber. He knows what happens if you ignore a leak.************Ted C. Fishman, author of the best-seller China, Inc.: How the Rise of theNext Superpower Challenges America and the World, is a member of USA TODAY'sboard of contributors.


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