For workers in their 20s and 30s, depressed stock prices following the worst 10-year U.S. market performance in history present an enormous opportunity. New research by mutual fund company T. Rowe Price finds that those who began investing regularly during severe bear markets in the past were significantly better off 30 years later than investors who began during bull markets — because they could buy more shares at lower prices.
But for many older workers in their 50s and 60s, the message from the meltdown is far different: To afford the retirement they desire, the only option is to work longer. That allows you more time to save, gives your investments more time to recover, decreases the number of years you need to rely on those savings, and boosts your Social Security benefits, which rise each month after age 62 that you wait to claim them, up to age 70.
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Mike Gray of Drexel Hill, Pa., plans to keep working at least a couple of years longer than he had planned. After years of dreaming about retirement, “it all changed in one fell swoop,” says Gray, 54. He estimates his retirement account lost 30 percent last year despite a fairly conservative investment strategy.
Gray, a marketing manager for a Philadelphia beer distributor, always assumed he’d retire at 62. Now he figures he’ll work until 64 — maybe longer. In the meantime, he and his wife, Laurie, 53, are paying down debt and delaying major purchases. Once their third child graduates from college and they pay off their mortgage, they’ll have extra cash to invest for retirement.
Laurie Gray still hopes to retire from her position as a manager at a local hospital in a few years. With 18 years under her belt and a traditional pension in her future, it’s possible. That would leave her plenty of time to make good on her promise to Mike to learn how to play golf. For their 30th wedding anniversary, she bought her own set of clubs (and presented them to him in a pink golf bag as a joke).
Although the Grays share a vision of retirement, some people are so distraught over investment losses that they can’t even talk about it. “Many couples told us that they have fewer assets, will need to delay retirement and work longer, and are worried about the impact of inflation and rising health care costs,” says Kathleen Murphy, president of personal investing at Fidelity. “Yet they aren’t planning their finances jointly to address these very important issues.”
In a survey of more than 500 married couples 45 and older, Fidelity found that 60 percent don’t agree on their respective retirement ages, and 42 percent have different lifestyle expectations in retirement. But ignoring the elephant in the room won’t make it go away.
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