The Retirement Race

By Quinn, Jane Bryant | Newsweek, March 15, 2004 | Go to article overview

The Retirement Race


Quinn, Jane Bryant, Newsweek


Byline: Jane Bryant Quinn, Reported by Temma Ehrenfeld, Ari Berman, Jason McLure, Ellise Pierce, Joan Raymond and Lynn Waddell

Bill and Joyce Cothey of Cleveland like to live large. They've remortgaged their home, taken vacations several times a year, reveled in new cars, and they're paying their youngest daughter's college tuition. What are they doing without? Retirement savings. "Zero, zilch, nada," says Bill, 54, a produce manager for a large grocery chain. "I never once thought about retirement and how we'd live."

They're thinking now, and so is the rest of the baby-boom bunch. As a group, they're earning (and spending) more than their parents did. Their net worth is higher, thanks to richer stock-market and real-estate values, but their lifestyle expectations are higher, too, and there's the rub. Only about half of boomer households are saving enough to preserve their working-age standard of living when they retire, the General Accounting Office reports. For the other half, living standards will drop unless they save more--much more--or work longer than they'd planned. Cothey has a union pension and expects to get Social Security. "But a sock with some money in it would be nice," he says.

Even the boomers who saved and invested have serious catching up to do. The long bear market slashed four years out of their money lives. Those who kept making regular contributions to their retirement plans should make up that lost ground pretty fast (except the tech-heads, who will be behind for years). Still, you're four years older now, with less time to play around.

I've gathered a few simple rules to help you get your retirement on track (more about that later). But first, we all have to face our fears about retiring broke. NEWSWEEK has compiled a number of portraits of people dealing--or not dealing--with retirement realities. If their stories help you get over the first emotional hurdles, you'll have successfully run the first lap in the retirement race.

WHAT, ME WORRY?

When "retirement" first starts sounding like a real word, it's common to go ostrich--dig your head right into the sand. Financial planners see it all the time. Bernard Kiely of Morristown, N.J., sits through many a talk with potential clients who come to his office and say they want to retire. "I tell them, 'Your spending is too high,' and they don't come back." Randy Kratz of Houston helped a couple work out a complex spending plan that entailed some sacrifice. "I never heard from them again, and they refused to pay the bill," he says.

Susan Eastman, 52, a journalist in Ft. Lauderdale, Fla., says that on her salary she can barely pay her bills, let alone save any money. Her retirement plan, she says, is "hope." (And, I might add, faith.)

By contrast, there's a Cleveland freelance writer who wouldn't let wishful thinking in the door. This "daughter of immigrants," she says, has saved 10 percent of every paycheck since she was 16. (Way to go!) She's building up serious money by never losing sight of the need to save.

Some people suffer because of the stubbornness of someone else. Scottsdale, Ariz., planner Sharlee Cretors is trying to help a woman, 42, married to a man 20 years her senior. He retired, ran through his IRA and won't put aside an extra nickel for her. She's saving as much as she can on a $36,000 salary, but isn't anywhere close to the nest egg she's going to need. Her predicament should resonate with married women. All of us need savings and investments of our own.

BETTING THE RANCH

People who'll need more money often dream of higher investment returns so they won't have to lower their spending. Planner Tom Orecchio of Old Tappan, N.J., recalls a visit from a retiree, then 62, whose portfolio peaked at $2 million in Janus funds and Cisco (at $80 a share). Orecchio advised him to diversify, but "that didn't play well." The retiree said he'd become a client when the value of his stocks reached $2. …

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