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Market Crash Alters Plans

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By MICHAEL POLLICK

Sarasota Herald-Tribune

Published: January 18, 2009

SARASOTA - Until the 2008 stock market crash, David and Priscilla Williams were planning on not spending many more cold winters in Philadelphia.

Two years ago, when real estate was still fetching a good price and stocks were riding high, the Williamses figured they were a mere 25 percent away from retirement, in terms of how much of a nest egg they wanted to have.

"Now, it may take us five years to get back to where we were two years ago," David Williams said.

During the boomers' peaking earning years, it had become a standardized demographic truth that they were going to be the richest retirement generation ever, because those born between 1946 and 1964 spent their working years in prosperity, had turned their homes into piggy banks, and were inheriting a lot from their World War II-generation parents.

But in just a few years, that typecasting has been warped beyond recognition.

A severe recession, on top of the long-playing slump in real estate and a more abrupt bear market in stocks, threatens the ability of boomers to sit under the palm trees as soon as they might like.

The fate of boomers such as the Williamses will have profound implications for Florida, which is already seeing the traditionally steady stream of retirees that help fuel its economy pinched by competition from aggressive states in the South and Southwest.

The state could lose even more as the financial crisis prompts boomers to delay retirement or to go to places offering a cheaper cost of living or to simply stay put, experts say.

But others argue that the crisis might have a silver lining, prompting two-household boomers to pull the retirement trigger sooner, selling their northern home and keeping the one in Florida to trim expenses.

For boomers measuring their retirement prospects through the stock market, the last year has been "a catastrophe," said StockSmart.com President Suzanne Cook, who tracks the data for a living. From October 2007 to now, U.S. stocks have lost nearly half their value, plunging from a market capitalization of $24 trillion to about $15 trillion.

"This money has literally vanished, and we are not through with this yet," Cook said.

Getting their hands on that equity "was considered inevitable - that these boomers would retire to Florida or whatever, this money would be available to them, and they would have a certain lifestyle," Cook said.

David Williams, whose tropical daydreams took him and his wife to a Mexican villa, said: "I walked around like a zombie for three, four weeks when this was crashing. I was waking up past midnight and looking at the overnight markets."

The stock market drop comes on top of a vicious decline in residential real estate. The decline in house prices since the middle of 2006 has led to a loss of more than $4 trillion in real housing wealth, which amounts to more than $50,000 for every homeowner in the country, a June study by the Center for Economic and Policy Research showed.

Frightened About The Future

Late baby boomers, ages 45 to 54, will absorb a big chunk of those losses, because they tend to have worked their way up to a fancier house than they started out with.

Increasingly, surveys and focus groups show, boomers are becoming frightened about their future, and intend to work longer than planned.

The big question for Florida's future is whether these economic reversals will mean more or fewer boomers taking up their primary residence in the state during their golden years.

At stake is the "mailbox economy" - the aggregation of all the pension checks, Social Security checks and Medicare benefits that will flow without interruption to wherever the boomers make their retirement stand.

As of now, Florida retains its position as the top receiving state for movers 60 or older, but it is gradually losing market share to other newer competitors, says William Haas, demographer at the University of North Carolina-Asheville, who is slicing and dicing yearly census data.

Retirees Are A Valuable Asset

Some Southern states - Louisiana, Mississippi, Texas and Tennessee - are actively recruiting the boomers.

Even now, retirees are proving what a valuable asset they are to Florida, said Gene Warren, a Phoenix-based consultant. "Because you have all those retirees who are getting Social Security checks and fixed benefit checks month after month. They are not getting laid off. They continue to get those checks and continue to spend money."

In a late-September poll of 450 boomers 45 or older, 55 percent believed that the financial crisis would cause them to delay retirement by five years or more. But they were planning on working longer than their parents did anyway, said Jeff Taylor, president of Eon.com, an online community for boomers, which ran the survey.

"The winds are blowing toward needing to work, and that is in very good alignment with the spirit of this generation anyway," Taylor said.

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