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No Longer Ready to Retire
In Economic Crisis, Nest Eggs Vanish, as Do Long-Held Dreams

By Brigid Schulte
Washington Post Staff Writer
Sunday, September 21, 2008

The American Psychological Association released a report showing that the No. 1 cause of anxiety for Americans is money fears.

That was in June.

After last week -- which saw volatile market swings, major bankruptcies of once-stable and venerated Wall Street firms and the largest government intervention in the market since the Depression -- people across the Washington area reported not only heightened anxiety about money, but uncertainty, if not outright fear.

People such as Tim Kenney or Thomas Williams said the summer's stress over rising gas, food and energy prices now feels like nothing. Now they are watching hard-earned savings shrink or simply disappear. Kenney began to wonder if the very foundation of the economy, and with it people's dreams and plans, was crumbling.

Jean Celine, 64, was already so worried about rising health-care costs that she'd been forcing herself to go to the gym every day to stay healthy. After last week, her nerves are shot. Like many her age, she has only a small pot of money to live on for the rest of her life. Any loss is a big loss. And the average 65-year-old retiree can expect to live 17 more years, the AARP says. So this weekend, Celine started a $15-an-hour job. "I'll probably be working for the rest of my life," she said. "Some golden years."

After last week, psychologists took to the airwaves to tell people not to become sick over losing money, advising that pausing was better than panicking. But by then, enough people had sufficiently panicked to make a run on the $3.5 trillion in money market funds, similar to the bank runs that led to the Great Depression.

"It's just amazing in the last four or five days how many times I've heard the words 'The Depression' brought up," said Kevin Flannery, general manager of the Leisure World retirement community. "It's all people are talking about here."

By Friday, after word of the federal intervention, people seemed to breathe a sigh of relief. But the wild week left many with changed visions of what might lie ahead.

* * *

Kenney, 58, had a gauzy vision of what his retirement would look like. A creative type, he didn't want to decamp to Florida or play golf all day. He wanted freedom. That meant having enough money to do only the work that he loved, to compose music, finally get to those two books he's been meaning to write, perhaps buy a farm in Iceland.

But after last week, Kenney, like tens of thousands of people reaching retirement age, is being forced to reconsider his future. Glued to his chair in front of two Mac computer screens, chain-smoking Camel Lights, Kenney watched, wide-eyed, as over the course five business days one-third of the value of his retirement savings simply vanished.

He hasn't slept well since.

"This hasn't really sunk in yet," he said Friday afternoon, lighting another cigarette and peering into the computer at a five-day market snapshot of squiggly lines rising and falling like the lines that monitor an irregular heartbeat. "It's an emotional thing. I'm thinking, so I've got to work until I'm 80? Are we done yet? Is this what my mother felt in the fall of 1929?

"I'm used to stress. I'm used to risk," he continued. "But this is scary."

Kenney runs his own marketing and electronic music businesses out of his Bethesda home. Like most Americans, he's carrying more debt than he'd like and he started saving for retirement late, in his mid-30s. Still, over the years, he was able to build up "a nice chunk of dough."

Last spring, he noticed disturbing patterns in the market similar to what he saw just before the dotcom bubble burst in 2000. Preparing for it, he miscalculated badly: He sunk a substantial amount of his portfolio into Fannie Mae and Freddie Mac stock. It was selling for $6 a share. Last Friday, a share was worth 60 cents. "The price was going down, and I figured it was a good time to buy. I thought, 'People are not going to stop making houses and moving into houses,' " he said. "I was a fool."

Instead, the two housing lenders, riddled with bad mortgage debt, tanked. By the end of Monday, 17 percent of his portfolio's value had evaporated.

Tuesday, his portfolio dropped an additional 12 percent. With a big work deadline looming, ironically for NASDAQ, Kenney struggled to concentrate, but found himself obsessively checking Internet news sites every five to 10 minutes to keep up with the swiftly changing story. He started drinking too much coffee and smoking. He kept a constant eye on his Wachovia portfolio, on major market indices and on the price of gold.

When he finally got a hold of his broker, he told him to dump all his financial stock. He only wanted to hold onto companies that "made stuff" and green businesses. He considered moving his money into money market accounts. And when they began teetering, he thought he'd just grab $10,000 in cash and stash it somewhere.

When he could no longer take the crush of bad news, he walked outside and weeded his garden.

Historically, the market has always recovered. He knows this. After the rally at the end of last week, his net loss had shrunk from one-third to 20 percent. The October 1987 crash sucked 30 percent out of the market in a few days, but the market recovered by the year's end. After the 40 percent drop in 2001, the market took two or three years to rebound. But at 58, Kenney doesn't know if he has enough time to wait for the recovery. Or if it will come.

"I'm wondering whether this augurs the end of the United States as a major power," he said. "This is the kind of financial instability that can pull a country down."

Kenney just finished putting his daughter through college. But he still has a 10-year-old son to educate. And he recently moved his aging mother out from California. He has not yet been able to bring himself to look at the hit her finances took and what that might mean for him. All he knows is this: "It just means you go back to work." He lit another cigarette and picked up the phone.

* * *

Williams is 45. Until recently, he made $44,000 a year working as a program coordinator for a pair of homeless shelters in Northern Virginia. All his life, raising a family on modest wages, any money he earned was used up simply by living. He had no life savings. And like many working Americans these days, he has no pension.

But seven months ago, he invested his first $50 into a modest 401k plan offered by the nonprofit company where he works. The bi-weekly deduction taken from his check was a late start, but better late than never, he figured.

"That $50 didn't come easy at first," he said. "But I knew it was something I had to do for the future." He was proud.

But after last week's turmoil, the uncertainty is eating at him.

"I probably just had six or seven hundred dollars in there, but who knows -- is it all gone now? Is it wiped out?" he asked.

He has considered taking the money out "so I don't lose anything more," but he knows that would open him up to penalties.

He has already taken in roommates to help defray the cost of his mortgage. And he has just taken on a third job as a drug counselor. "I do feel kind of in a bind about what to do," he said.

-- Chris L. Jenkins

* * *

With the good fortune of athletic talent and sons in college on partial scholarships, Henry and Jodie Lee will spend about $56,000 this year in tuition and expenses. With a fourth queued up for college in a few years, the couple is staring at another $200,000 ahead of them.

The Lees -- he's a 57-year-old dentist, she's a 56-year-old retired owner of a gymnastics facility -- are among Washington area parents who are left wondering how they'll pay for college. The couple is hardly destitute, and have cash savings they can tap. Still, their college nest eggs have been gutted by about 20 percent in the past 12 months. If things don't improve, Henry Lee will probably put off retirement by several years.

"Do you remember how bad the '80s were?" Jodie Lee asked her husband Friday evening, speaking of a time when interest rates were sky-high and seeking the balm of perspective as they sat in the bleachers at their youngest son's high school soccer game in Rockville.

Then she answered her own question: "If you had a 10 percent mortgage, you were doing great."

They've talked about their options: If things get worse, Jodie could go back to work. They could limit their youngest son's college choices to exclude high-priced private schools. The kids could take out student loans.

The son of Chinese immigrant restaurant owners who couldn't pay his tuition, Lee carried about $25,000 in debt coming out of dental school. "I'm not really big on that," he said. "But we'll do what we have to do."

-- Dan Morse

* * *

For seven years, Eliot F. Battle, 52, a Harvard-trained dermatologist, has been beautifying the faces of the District's affluent and elite. And in each of those years, he said, his business -- a Botox, skin treatment and plastic surgery business -- has grown by 25 percent.

Ever since they opened Cultura Cosmetic Medical Spa in Northwest Washington -- a doctor's office with a spa environment and retail storefront that specializes in beautifying ethnic skin -- Battle and his partner have had ambitious plans to expand. This year, they had hoped to open offices in Atlanta, Chicago and New York.

Instead, as customers have begun to limit or increase the length of time between treatments, Battle has halted expansion plans and taken defensive measures to shore up existing business.

His firm has gone from being the darling of Wall Street, fielding calls from venture capitalists eager to throw down money to help them grow, to seeing operations such as theirs across the country go out of business.

"We're getting calls on a monthly basis from other med spas asking us if we can buy them out," he said. "We decided we need to buckle down our ship's hatches."

After last week, Battle said he will be grateful if his Wisconsin Avenue practice grows a modest 5 percent this year. He still plans to give his 24 employees a bonus. It will just be smaller.

-- V. Dion Haynes and William Wan

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