USA: Aggressive retirement plans backfires for seniors

. CHICAGO / Sun-Times / December 7, 2008 ‘EVERYTHING WAS GREAT’ | But aggressive plan backfires By Francine Knowles, Business Reporter She couldn’t believe it. At the age of 66, she watched her $206,000 retirement portfolio plummet by nearly $100,000 this year. Theresa B., who didn’t want her real name used, had roughly 70 percent of her portfolio in stocks. She didn’t realize the significance of that until the market started tanking in recent weeks, she said. It has left the former retail and travel industry veteran, who hasn’t worked since 2005 because of a spinal condition, worried about what lies ahead. “I don’t know what I would do if it all went away,” she said. Looking back, “Everything was great,” Theresa says. “I’d go to see my broker once a year. We would sit down and look at everything. . . . All along I didn’t ever realize how important it was to know that if you have an aggressive portfolio, if something happened to the market, you could take a dramatic loss.” Sitting in the North Side flat she rents, she shared how she feels embarrassed and foolish now. After leaving her job with a major local retailer at the age of 50, Theresa, who lives alone, relied on her then-roughly $275,000 portfolio for income, taking out $24,000 annually and supplementing that by working in the travel industry. But when she developed back problems a few years ago, she began relying solely on her retirement income because she had to quit work. When her broker set up the portfolio, he put the bulk in stocks because “the goal was to have enough money to last me the rest of my life, so I wouldn’t have to be a burden to my daughter,” she said. She noted her aggressive stock portfolio “did great for 13 to 14 years.” But then the government bailed out AIG and the market started its free fall. She went online after the AIG bailout and checked her account — to find she’d lost $14,000 overnight, she said. And from there it got worse. She e-mailed her broker asking what she should do. “I was upset,” she said. “He didn’t call me until the end of the next day. He apologized. He had 1,000 e-mails. We talked for a long time, and I was crying.” She’s forgiving of her broker, whom she’s known for 15 years and says is like family. Still, she believes he should have advised her to reduce her stock allocation. But Theresa, who plans to return to the work force once she recovers from her illness, also faults herself. “I didn’t take the initiative,” she said. “I just left it. I should have paid more attention to my portfolio all those years, when it was high.” Still, she believes in the end, the market will recover. “I know it’s going to take a while,” she said. “But I do think it’s going to be OK. I have hope.” © Copyright 2008 Digital Chicago, Inc