Living in financial fear
Call it retirement anxiety, or maybe recession obsession.
For all of their married life, Patrick Webster, 63, and Susie Martin, 54, have been extremely frugal.
Webster and Martin, who both work at Marymount College in Rancho Palos Verdes, Calif., have been stashing away their combined income at an enviable rate — more than 25 percent — for retirement.
Together they have more than $1 million in investments and no debt. But rather than feeling reasonably secure about their financial future, they dread a return of hard times.
“I wanted to be a multimillionaire and retire at 54, but everything crashed,” Webster said of the stock market downturn in 1990. At that time, he was teaching in Texas. “I lost my job, lost my house. I lost everything.”
“My horizon is no longer 25 years,” he said. “If we have another stock market crash and the Dow goes back down to 6,000, I don't have the time to recover. I would have to work until I die, and I don't want to do that.”
Certified financial planner Delia Fernandez, who reviewed the couple's financial situation, said that feeling of vulnerability is common among baby boomers, who have had their confidence rocked by the volatility of the stock market.
“A lot of younger people don't realize what the baby boomers have been through,” Fernandez said. “The fact that the market has come back every time is small comfort.”
Stock market contractions have not only come more frequently since 1990, they have been progressively worse each time, she said.
There was a roughly 15 percent decline from June to November 1990, then a 15 percent drop from July to August 1998. Next was the long bear market that ran from September 2000 to September 2002, when the market fell nearly 45 percent. The worst was a 51 percent decline between November 2007 and February 2009.
Like a lot of baby boomers who saw the value of their investments erode in the last recession, Webster expects the worst.
“Something is going to happen in the next five years” to the economy, he said, “and we need to be better prepared for it.”
How have they prepared so far?
“We don't go to Starbucks every day. No manicures, no pedicures. Those kinds of things really add up,” Martin said.
Webster's response was to work more like someone who was earning only a minimal wage. Even though he was making $80,000 annually working as a full-time math professor at Marymount College — with Martin adding her $70,000-a-year salary as an articulation officer, who provides educational and vocational guidance services — Webster held a second job for 18 years.
Fernandez, founder of Fernandez Financial Advisory in Los Alamitos, Calif., commended the couple's robust ability to save money. She worked with them to ease their fears.
During a two-hour meeting, Fernandez showed the couple that Webster could retire as early as 65, even though he still has plans to work until 70.
Fernandez even factored in the possibility of four years of expensive long-term care. It barely made a dent in the couple's newly reformatted investment outlook.
The shift in the atmosphere of the room was palpable. Martin, who had put distance between herself and the couple's investments, was suddenly taking copious notes.
Webster shifted from a slight slouch in his chair to the front edge of his seat, his back suddenly straighter. He actually began to smile.
“I don't have to work two jobs again,” he said.