Retirement Postponed

Charles Burge had been counting the days until retirement. He spent decades as a New York City employee, starting as a trash hauler and working his way up to middle management. Along the way he worked part time as a physical therapist, pouring extra cash into retirement accounts. In mid-2006, Burge, who's now 54, told his boss he'd retire at the end of 2008—but things have gone downhill ever since. His financial planner, David Frisch, moved some of Burge's savings into cash, but the portion remaining in stocks has steadily lost value as the market slid. The worth of his Long Island home, once a half-million dollars, has dropped by $70,000 thanks to the housing bust. Late last fall Burge and his wife, Anna, 57, a homemaker, decided the numbers looked bleak: instead of retiring to a Florida condo later this year, he now plans to work until 2011 to maximize his city pension. "I don't feel as wealthy and secure as I did," he says.

Join the club. The triple whammy of the housing bust, the weakening economy and the turbulent stock market affects most Americans, but few are as shaken as leading-edge baby boomers on the brink of retirement. "There's a lot of sheer panic out there," says financial planner Bert Whitehead of Cambridge Advisors. For many boomers who'd planned the stereotypical retirement play of selling their house and downsizing to a sun-belt condo, falling home values and a lack of offers have put those plans on hold. For others, the financial markets are the biggest complication: today's soon-to-be retirees are far more reliant on 401(k)s, with their fluctuating values, than on traditional defined-benefit pensions with stable values. And for would-be retirees who aren't ready or positioned to quit working entirely just yet—a group that includes many of the employees considering buyout offers from companies like Ford, General Motors and Delta—the weak economy is making them question the ease with which they'll launch a second or part-time career. "People are hesitant to take these packages," says Mark Caruso, president of United Auto Workers Local 892, which represents Ford factory workers.

America's last recession lasted from March to November 2001, and between September 2001 and September 2002, the S&P 500 dropped by nearly 50 percent. By the fall of 2002, according to an AARP survey of 50- to 70-year-olds, 21 percent of working people who'd lost money in stocks had decided to postpone retirement as a result—and 10 percent of folks who'd already retired had returned to work. David Certner, legislative policy director at the AARP, attributes the large number of people who switched course to the "vagaries of 401(k) plans," which require workers to contribute enough money and manage their mix of assets to prevent their nest egg from falling short. Mark Schuver in Lafayette, Ind., understands those risks. Schuver, now 61, was an executive at Caterpillar who retired in 2002. But with the value of his investments falling, he took a job organizing business courses for Purdue University, and realized he's happier with a steady paycheck. It's not an uncommon realization, particularly in a down market. "About a quarter of the clients I've seen retire go back," says planner Joe Clark of Financial Enhancement Group in Anderson, Ind.

For other families, the housing market is the major impediment. Washington State real-estate agent Pili Meyer, 62, says many of her 55-and-older clients are held in suspended animation by homes that just won't sell. Their most common sentiment: "This isn't going to work out exactly the way I'd planned." Typical are Jim and Jane Shefler of Port Angeles, Wash., who put their house on the market last April for $445,000. Since then they've cut the price to $399,000 and offered to provide seller financing to a qualified buyer. With no takers, they've moved into a rental near Seattle, and Jane, who turns 58 this week, has gone back to work part time. "It's probably caused more emotional disruption than financial disruption," says Jim, 59. But their retirement will remain slightly crimped until they convert their home equity into investments that provide a monthly income.

Still, for some boomers this jitteriness isn't the end of the world. Compared with prior generations, many boomers intend to work longer anyway. And Stuart Ritter, a financial planner at T. Rowe Price, says staying in the work force an extra year or two can have a powerful effect on a near-retiree's financial picture. Not only will it provide time to build more savings, but it's one less year of drawing down savings for living expenses. For people bummed by this development, Ritter sometimes suggests "delaying retirement, but not the gratification." For instance, if you'd planned on taking lots of cruises in retirement, book a two-week cruise now, but go back to work afterward, and find other small ways to reward yourself for the continued toil. That advice sounds great to Julie Pecori in Watertown, N.Y., who sold her interest in an explosives company in 2006 and now works as a part-time consultant. Trouble is, traveling abroad is a nightmare thanks to the falling U.S. dollar, and she's so nervous about the economy and what lies ahead that she finds herself working longer hours. She's also skeptical that the latest Federal Reserve rate cuts will make much difference. "I still think things are going to go [down] further," she says. If they do, hers will be one of many dreams that remain deferred.