The anxiety years

Peter Inglis of Petaluma dreamed of retiring in his 50s, following a 30-year career as a painting contractor.

But the turbulence on Wall Street and a slowing economy has forced a change in his plans.

"I'm not going to be retiring anytime soon," said Inglis, who turned 58 last week. "My nest egg is half of what it was two years ago."

Baby boomers are rethinking retirement as they watch their investments dwindle. Plummeting home values, fading 401(k) accounts, shrinking interest on CDs and worries about their own jobs are driving the trend.

Fears about the future of Social Security and defined-benefit pensions only add to anxiety for the over-50 set.

"Even people who are five years away from retirement are nervous," said Rick Duarte, financial advisor with LPL Financial in Rohnert Park.

More than half of people surveyed in an Associated Press-GfK poll released last week said they worry they'll have to work longer because the value of their retirement savings has declined.

For Inglis, who founded Stroke & Kote Quality Painting in 1976, the decision to postpone retirement was a no-brainer.

"Business is down, there's more competition," he said. "I was doing pretty good until the last couple of years."

His eight-employee business is surviving the economic downturn, but the outlook is uncertain, he said.

"It's a scary time," Inglis said. "You go into a paint store, and it's real quiet."

The sour economy "has made everything more difficult," he said. "Now, I won't be retiring at least until I qualify for Social Security."

The meltdown in the markets is hitting investors at a time when they are increasingly responsible for funding their own retirements.

Companies have been eliminating pension plans for employees, placing a greater burden on individuals to manage their own 401(k) plans and invest in the market.

In 1980, 60 percent of workers were covered by defined-benefit pension plans and just 17 percent relied on defined-contribution plans, such as a 401(k), according to the Center for Retirement Research at Boston College.

By 2004, the numbers had changed dramatically: 11 percent of workers were covered by defined-benefit plans and 61 percent were covered by defined-contribution plans.

That means more individuals are exposed to fluctuations on Wall Street. And recently, the news has not been good.

The third quarter's decline of 4.4 percent marked the Dow's fourth straight quarter of losses -- the longest losing streak since a five-quarter drop that ended in 1978.

And it's not just that their investments have declined by nearly 24 percent since last October. It's the worry that the market won't make up those losses anytime soon.

Investors can expect to wait as much as three years to recover the market losses they see in their 401(k) or other investment accounts, Morningstar vice president John Rekenthaler said.

The five bear markets since the 1960s have lasted an average of 3.4 years from the beginning of the decline to recovery, according to Morningstar's Ibbotson Associates.

Still, there's no reason for boomers to panic, said Duarte, especially if they have diversified investment portfolios.

"The market always bounces back," he said. "The question is 'when?' "

This isn't the first time baby boomers have faced an economic crisis, he said. The technology bust of 2001 also forced 50-somethings to reconsider retirement.

The retirement age has increased since then, with many older people transitioning into part-time work as consultants or temporaries, Duarte said.

"It's not full retirement anymore," he said. "It's retirement from their careers."

The average retirement age in the United States is now 63, although most won't qualify for full Social Security benefits until 67.

Workers age 55 and older are becoming the fastest-growing demographic in the U.S. labor pool, according to the Bureau of Labor Statistics.

People who retire too soon can miss out on their peak earning and investing years, said Barbara Chown, a financial adviser at Foothill Securities in Santa Rosa.

"I don't think you should retire at 60," she said. "You're going to live for another 30 years."

Some are working longer to keep their health coverage, Chown said.

"People are becoming more realistic about retirement," she said.

Those with diversified investments, few debts and paid-off mortgages are in the best position to reach their goals, Chown said.

Retirees need enough financial "wiggle room" to avoid running out of money, said Jan Schneider, a certified financial planner with Protected Investors of America in Santa Rosa.

"It's much better to work a couple of extra years than to have to go back to work in your 80s," she said.

People should resist dumping their investments when the market's down, Schneider said.

"They need to be in a place where they're not forced to sell," she said.

Now is a time to get company shares at bargain prices, according to Schneider.

"Why not buy now, when it's cheaper?" she said.

Financial planners are telling investment clients to stay the course, said Harry Rubins of Rubins Financial Services in Santa Rosa.

"It's my job to help them realize their situation isn't falling apart," he said. "Good companies aren't going out of business."

A few extra years of work will pay dividends in retirement, Rubins said.

"The more years they can add to their 401(k), the better off they'll be," he said.

Robert Wong, a 58-year-old respiratory therapist from Petaluma, isn't worried about retirement.

"I haven't looked at my 401(k), but I'm sure it's down," he said. "I still have time for it to turn around."

He isn't planning to retire for another seven years, said Wong, who works at UCSF Medical Center in San Francisco.

"I have a pretty secure job," he said.

Teacher Sarah Jaeschke is not so fortunate.

"I'm going to be working forever," said Jaeschke, who recently left her job as a part-time math instructor at College of Marin in Kentfield.

"I couldn't afford to live in the Bay Area," said Jaeschke, 58, who moved from Petaluma to Kona on the island of Hawaii two weeks ago.

She's living off savings while she looks for a new job, Jaeschke said.

"I'm having to be very careful, to not be a consumer," she said.

The Associated Press contributed to the report. You can reach Staff Writer Steve Hart at 521-5205 or steve.hart@pressdemocrat.com.