Retirees Back To Work Stock Dead*

Out of the Easy Chair, Back to the Grind

By Mark Leibovich

Washington Post Staff Writer

Saturday, September 29, 2001; Page A01

Five years ago, at the age of 61, Bruce Oradei retired from his job as an education lobbyist and began living out his years at a lakeside cottage in northern Wisconsin. But on Thursday, Oradei returned to work – this time as a substitute teacher.

Like many Americans, Oradei's retirement nest egg is composed largely of stock. This allowed him to retire earlier, and richer, than he ever expected to amid the bull market of the late 1990s. But when the Dow Jones industrial average tumbled below 9000 on the first day of stock trading after the Sept. 11 terrorist attacks, he picked up the phone and inquired about a job.

The Dow's dive that day was the latest blow in what had been a brutal year in the stock market. His losses forced Oradei to change his retirement plans – a scenario familiar to many people who have recently left the workforce or who had hoped to do so soon. They are not the most visible exemplars of the market's bull-to-bear whiplash – the fallen dot-com titans, chastened day-traders and former paper gazillionaires.

Yet the stock swoon has affected many older Americans more acutely than those who have more time to adjust their earning, investing and savings plans. In the 1990s, seniors were told, they were living in a new economy, a world of seemingly boundless stock market optimism. The environment created a new kind of calculus for retirement – altering expectations about how much money they would accumulate and when they could stop working, while sweetening hopes of what new financial freedoms awaited them when they did.

Since the middle of last year, however, those calculations have been harshly restored to previous notions. So Bruce Oradei has begun a second career. He did some elementary math: His individual retirement account – a portfolio of Dow Jones industrial stocks – had dropped in value by nearly 40 percent. He figured he needed to earn $1,500 a month to recoup his losses. Now Oradei plans to work five days a week for the school system of his hometown, Sun Prairie, Wis. "I will teach whatever age and subject they ask of me," he says.

Steve Jacobson of Chevy Chase had expected to leave his job at Brian Logan Real Estate in the District after next year. He planned to retire to Ocala, Fla., and join the woman he had been "dating on and off for about 25 years."

"We were planning a 'Florida marriage,' " said Jacobson, who is 64. "We were going to live together, not get married and collect two Social Security checks." This would supplement his savings, about 75 percent of which was in mutual funds and individual blue-chip stocks.

But his portfolio has lost half its value in a little more than a year; he won't disclose the exact sum, only that he no longer has enough to retire comfortably. Barring a dramatic turnaround in the stock market, Jacobson says, he'll probably keep working for another two years.

"People who are at retirement age seem more concerned than people who have more time left in the workforce," said Jack May, a financial planner at Lara, Shull & May at Tysons Corner. This is not a surprising view, given the time frames of people with fewer years left to enjoy. Likewise, this will hardly be the first generation of older Americans whose best-laid retirement plans have been thwarted by broader economic factors. In the 1970s, for instance, many people retired on fixed pensions – only to have inflation eat away at their savings much faster than they had expected. Many had to return to work.

But over the last two decades, the financial prospects of people in retirement seemed relentlessly bright – and plans were made accordingly. The income of retirees has grown more than twice as fast than that of pre-retirees, according to a survey conducted by AARP. This has been due largely to investment gains. But it also reflects a trend toward "phased retirement," in which workers leave their full-time jobs but find part-time work to supplement their savings. More than 60 percent of workers say they plan to do some work in retirement, according to a study released last week by the Employee Benefit Research Institute.

But the stock boom of the late 1990s created dangerous expectations for some would-be retirees, investment advisers and financial planners say. It spurred many people to invest less conservatively than they normally would. This has left many older Americans in difficult financial circumstances today.

Rita Bregman, 59, became infatuated with the stock market in 1998. She took the proceeds from the sale of some real estate holdings – $38,000 – and invested them heavily in technology stocks. She owned a roster of highfliers such as Microsoft, America Online, Yahoo, EMC and Cisco. She had been living from paycheck to paycheck, but suddenly owned investments that looked as though they would appreciate forever.

She had co-written a book of poetry and planned to stop working in a few years, go abroad and spend time with poets in Europe and South Africa whom she had met over the Internet. Her investment earnings would allow her to cultivate new skills, travel to once-unaffordable parts of the world and explore artistic notions of herself. At the market's peak 18 months ago, Bregman, who is divorced, owned a stock portfolio that was worth $120,000.  "I should have sold then," she said – the famous last words of this volatile economic time. Her portfolio is now worth $4,154.

She no longer gets cable television or has the newspaper delivered to her home. She goes to the hairdresser every eight weeks instead of every four, and almost never eats at restaurants. Fixing the transmission of her 1983 Volvo is out of the question. As is retirement, now or any time soon. She took a second job – working Saturdays at a women's boutique in Berkeley, Calif., in addition to her weekday job as an executive assistant at a nonprofit environmental advocacy group in San Francisco.

"I wake up every morning and think, 'How long will I have to work? How much do I have to put away to ensure that I'm taken care of in case something happens to me physically?'‚" She could have done things differently, of course: diversified her holdings into more conservative investments such as bonds or Treasury bills. But her depleted savings remain in the stock market, which she still believes is the best way for her to make up her losses. She owns shares in three companies now: AOL, Texas Instruments and Krispy Kreme doughnuts.

Bregman represents one end of the financial spectrum, those who have lost relatively small, unforeseen windfalls. But the market plunge has also scrambled the plans of people who reaped Nasdaq fortunes a few years ago and looked forward to retiring in their forties.

Craig Longanecker, 40-year-old senior investment specialist at a Charles Schwab office in Gaithersburg, figured that he could stop working if his savings hit $3 million – which they just about did at the height of the bull market early last year. He looked forward to building up his investment assets even further while shaving his golf handicap. He thought he might do some volunteer work on the side.

But not for the foreseeable future. His stock holdings – which included a high concentration of technology issues – have dropped 60 percent from their peak. Nearly a third of these losses have occurred since the terrorist attacks. While his holdings remain comfortably in seven figures, and he says he enjoys his work, this has been the most difficult period of his 11-year career as a broker.

Still, Longanecker remains hopeful that the market will withstand the recent downtown and the shock waves of Sept. 11. "I have faith in history," Longanecker said. "If you look at all the horrific events in this country's history, the market has always come back."

He also takes solace from what happened yesterday, "a fun day," on which the Dow gained 166.14 points and the Nasdaq composite index rose 38.09 points.

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