Boomers Weigh Risk And Retirement

Murray Kaftan, 53, a self-employed management consultant, is seen Monday, March 15, 2004 outside his Marlboro, Mass., home. Kaftan, whose investments were decimated during the economic downturn, says he is slowly rebuilding his retirement plan finances but won't be able to retire when he had hoped.
In the late 1990s, baby boomers thought they would accumulate enough wealth to retire before 60. Then the recession hit and the stock market tanked, and they became convinced they'd have to work into their 70s.

Now, with the economy on the mend, boomers are adjusting their mind-set once more, recognizing they had been equally unrealistic in their previous optimism and pessimism.

"They realize that the world is not super rosy, as it was in 1999, and that it's not doom and gloom, as it was in 2001 and 2002," said Stephen P. Wetzel, a 43-year-old financial planner with Prometheus Capital Management Corp., and a business professor at New York University. "It's almost, like, now we can get down to basics."

Retirement experts say that while boomers are now aware they should rely less on the stock market and more on savings to meet financial goals, they cautioned that 40- and 50-somethings have been slow in changing their behavior.

"Despite the bear market, there doesn't seem to have been a significant shift away from equities yet," said Stephen Utkus, director of Vanguard's Retirement Research Center.

"One thing you have to be cautious about," Utkus added, "is the difference between what people say and what they do."

A recent survey of some 2 million 401(k) participants by Vanguard showed that 67 percent of their assets were in stocks, compared with 71 percent at the height of the bull market - a smaller decline than Utkus and others expected.

But boomers rattled by the ups and downs of the market over the past five years insist their financial performance expectations have mellowed and, to a lesser degree, so has their spending.

To 53-year-old Murray Kaftan of Marlborough, Mass., whose stock investments were decimated during the economic downturn, the glass today seems less than half full, if slowly on the rise.

Kaftan, who is divorced and has a son who recently graduated college, said he is preparing more food at home to save money, diversifying his stock portfolio with help from a financial planner and putting off refurbishing his condominium. He also wants to buy a new car, but will wait until he has "more of a cushion in my bank account."

"Though I don't want to be that conservative, I have to be, because I don't know what's going to happen," said Kaftan, a self-employed management consultant to the insurance industry. "All I know is that my investments are making a little bit of a rebound."

So with patience and, yes, a little luck, Kaftan believes he'll be financially secure enough to semi-retire at 65, five years later than he had planned before the market nosedive, but a decade earlier than he thought was possible at the economy's nadir.

Steve Hassan, a 48-year-old accountant who lives outside of Los Angeles, also took a beating "on paper" in the last bear market, although he's feeling relatively secure these days because he and his wife have little debt and "live within our means."

That said, Hassan's current retirement plan is predicated on lower returns for every dollar invested, and he now contributes $400 more each month to his 15-year-old son's college fund. Over the long term, Hassan expects to earn 6 percent to 8 percent a year from the stock market, far below the 20 percent that seemed possible a few years back.

Hassan recently explained to his son that the family has enough saved to cover his undergraduate education, but that it will require diligent budgeting and perhaps a part-time job to pay for graduate school.

While Kaftan and Hassan both emphasized the importance of moderation, by tempering the urge to load up on stocks and monitoring their spending, some experts said there are plenty of boomers still prone to excess.

"There are people taking too much risk trying to catch up, while others are too scared to get back into the water," said Christopher Sheldon, director of investment strategy at Mellon Private Wealth Management, which advises clients whose portfolios have $1 million or more.

But while boomers are just as willing to put their money into stocks as they were in the late 1990s, now they're more open to building a balanced portfolio and taking advice from trained professionals - even if it means single digit returns for the next five to 10 years.

"They would rather have less volatility," said Nan Sabel, a financial planner based in Bedford, Mass. With Federal Reserve Chairman Alan Greenspan warning the public about the massive funding gap faced by Social Security and modern medicine extending the average lifespan, boomers are increasingly concerned about making their money last, Sabel said.

Indeed, some experts are concerned about the disparity between the vast amounts boomers invest in the stock market and the relatively small amounts they save. Unless they curb spending or plan on working later in life, financial troubles could lie ahead for many.

By Brad Foss