Retirement dreams 
give way to despair, anger
Many grappling with golden year disappointments as nest eggs dwindle
Kim Carney / msnbc.com
A rising number of people have seen their retirement plans evaporate. As 401(k)s dwindle, their dreams of golden years are being replaced by feelings of hopelessness and anger.
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It was so close. And then, it wasn’t.
Fifty-year-old Eddie Whitlock thought he was closing in on his hard-earned golden years. According to his master plan, in just five short years he’d retire from his job as executive director for Mental Health America of Northeast Georgia. Then he’d turn his attention to the important things: golf, travel and finally writing that novel.
But this fall, after months of watching his 401(k) dwindle and his stock earnings sink, he accepted his new retirement reality: His golden years would be delayed another 10. If they ever came at all.
“I really think I’ll be working until I die,” says Whitlock, who lives in Athens, Ga. “I’ll be at work till the day they carry me out on a stretcher with a coroner’s tag tied to my big toe.”
One of the biggest worries for those on the brink of retirement used to be how to fill all that spare time. But as the economic meltdown devastates the savings of millions of Americans, a rising number of older workers are now are realizing that retirement instead will have to come much later than they’d planned — if at all. And some of those who had only just to begun to enjoy their leisure years are now having to tuck aside their dreams and, in some cases, their pride, to return to the workforce.
For many, feelings of hopelessness, despair, anger and shame have darkened what until very recently they’d banked on being a new beginning.
“It’s a real sense of shock,” says Phyllis Moen, a University of Minnesota sociologist who studies adjustment to retirement. “Here they thought they were in control, and they created a life that works — and suddenly, they’ve lost control. I think what’s happening is a real upending of expectations of the 50s, 60s and 70s — of what life’s going to be for this group of people.”
Psychologists say those going through this kind of financial crisis may feel a spike in anxiety, panic attacks and depression. And for some, suicide may seem like the only way out. One msnbc.com reader from Cleveland, Ohio wrote ” I have contemplated suicide, but my family does not have enough money to bury me.”
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During the Great Depression, suicide rates rose from 14 to 17.4 per 100,000 people in 1933, according to the American Association of Suicidology, a nonprofit organization that promotes research and training in suicide prevention.
Psychologists are cautious about saying whether they expect a similar increase during these financial hard times, but seniors are in an age group already at higher risk for suicide: Although adults 65 and older make up just 12 percent of the population, they accounted for 16 percent of suicide deaths in 2004, according to the Centers for Disease Control and Prevention.
“There’s going to be a profound sense of loss for some people who had expected to enter their last stage of life and just enjoy it — and now they’re having to go back to work,” says Jennifer Harkstein, a New York City clinical psychologist. “For people who have expected to be retired by 70 or 75, there’s going to be some loss, some grief, that they can’t go and live these years that they’ve planned for.”
For Whitlock, the biggest blow came from the increasingly volatile stock market, as he watched his nonprofit employer’s account lose 25 percent of its value over the last year and a half. When he says he’s too afraid now to even peek at his 401(k), he’s only half joking.
“In the old days, people would be guaranteed an income for life, and they’d have an age at which it was clear they should retire,” says Alicia Munnell, an economist and director of the Center for Retirement Research at Boston College. “We’re now shifting to an age of 401(k) plans, which is shifting all the risks and responsibility to the individuals.”
Downsizing dreams
For those who have retired, it’s a matter of downsizing dreams. So far, 63-year-old Edith Durrant’s retirement years haven’t turned out the way she pictured.
“My real dream always was to own a motor home and just travel,” says Durrant, a retired postal service worker who lives in Bellingham, Wash. Because she and her husband, Ben, had saved a modest nest egg, she says, “I didn’t think I would ever have to worry so much about money again.”
But five years ago, Edith Durrant, who is both epileptic and diabetic, had a particularly intense seizure that sent her into a coma for seven days. The cost of her hospital stay, her medications and the year and a half of care it took her to get well again drained everything the couple had saved for their retirement. Still, with her pension and Social Security benefits, they were doing OK — until Ben Durrant was laid off from his job as a sales manager at Office Max in June. Five months later, he’s still looking for work.
“Don’t get me wrong. We eat. We have a roof over our heads. By the look of my belly, it’s not bad,” says Ben Durrant, who’s 59. “But still, there’s the other side of it. You look on the Internet and it talks about these high fashion things and the trips and things like that. You look at them and you wonder — where did mine go? I’m not going to be able to do that. It’s a very sobering thought.”
Adjusting expectations
The Durrants have resigned themselves to their retirement reality, which is what experts recommend: During an economic downturn of this magnitude, it’s time to let go of most golden-year fantasies.
“I mean, I’m of that age. We’ve all had a disappointment,” says economist Munnell, who turns 66 next month. That’s the age she typically recommends that people retire, and she always imagined she’d follow her own advice. Now, she’s buckling down for at least another five years on the job.
“I’m very like everybody else — I felt like we had put aside enough money, but I didn’t plan on a buffer of 20 percent,” she says. Speaking for herself, she says, “The feeling is one of failure, even though it was really very hard to anticipate anything like this. You do feel like you failed.”
For those at or near retirement age, there’s no more time to save. There’s no magic investment to uncover. It’s best to face your 401(k) and lower your expectations — fast, Munnell says.
“You’ve got to play the cards you’re dealt, and play them the best you can,” she says. “Mourn if it’s a serious loss for you, but then, candidly — get over it.”
And then get to work. With the unemployment rate at its highest in more than a decade, those lucky enough to have a job should forget all thoughts of leaving, says Munnell, who co-wrote “Working Longer: The Solution to the Retirement Income Challenge,” published earlier this year. “(But) the problem is, it takes two to tango here. Employers have to be willing to hire people or to retain them.”
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When you buy a derivative you are buying a contract that is similar to an insurance policy. Unlike a futures contract in which you agree to pay a certain price for future delivery of gold, corn, or whatever, nothing is ever delivered in a derivatives contract - except a payment from the seller of the contract to the buyer should the contract described event happen such as the default of a particular bond. Derivatives are essentially just highly speculative bets that are not secured by anything tangible and this is what makes then so dangerous and volatile - especially in highly volatile markets.
The Wikipedia definition of Derivatives is as follows:
“Derivatives are financial instruments whose values depend on the value of other underlying financial instruments. The main types of derivatives are futures, forwards, options, and swaps.
The main use of derivatives is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market. Derivatives can be based on different types of assets such as commodities, equities (stocks), bonds, interest rates, exchange rates, or indexes (such as a stock market index, consumer price index (CPI) — see inflation derivatives — or even an index of weather conditions, or other derivatives). Their performance can determine both the amount and the timing of the pay-offs.”
http://en.wikipedia.org/wiki/Derivative_(finance)
The single biggest problem with derivatives is that most all derivatives contracts are UNLISTED PRIVATE CONTRACTS BETWEEN COUNTERPARTIES and there is thus no way to establish “market value” of derivatives. They are not trades on exchanges and are essential subjectively valued “Level 3″ assets that only have value if another party can be found to buy them. If derivatives were required to be STANDARDIZED AND LISTED ON OTC EXCHANGES they would not be such a danger to the economic system as there would be “market value” and they would become much more “fungible” like commodities (which are totally fungible) and there would be transparency.
If you really want to understand why derivatives are so impossible to value and so complex, try reading an actual sample derivaties contract:
ABD AGREEMENT OTC-DERIVATIVES
http://print.onecle.com/contracts/navteq/abn-amro.derivatives.2004.shtml
You will quickly see, even if you are an experience financial person or lawyer, why derivatives are so impossible to value because of their vast incomprehensible complexity with a “trigger” hinged on uncertain external financial events - and that is the most fundamental problem related to the whole $500 billion to $1 quadrillion nominal value derivatives nightmare.
The derivatives bubble is the single biggest credit bubble in the world with some estimates putting the total nominal amount of $1 quadrillion. By the most conservative BIS estimates it is well over $600 trillion. However, there is a huge difference between the actual amount of money involved in the derivatives misadventure and the “nominal” value which is like the face value on a life insurance policy. The actual money involved is more like the premiums paid on a term life insurance policy and is probably no more than 2% of the nominal value. Even at 2% that still means that there are over $12 trillion involved in the derivatives betting game. There is no question but that the derivatives gambling casino will go bust.
GTM
The best solution is to simply void all derivatives contracts and return the premiums paid on them and unwind the entire derivatives markets in its entirety. All it is financially is a betting parlor with best on which way indexes, or interest rates, or whatever will move. There is no financial value in such arrangements and all is does is to create vast risk of losses (in the guise of doing exactly the opposite by “hedging them”) and this entire derivatives market worldwide should be unwound and shut down in an orderly fashion before it implodes or explodes.