Baby boomers rethink their ideas about retirement

It was a great notion -- retiring at 55, maybe as late as 60, while still enjoying the same fabulous lifestyle of travel, good food, theater and more.

For many baby boomers, it vanished along with billions of dollars in the stock market or jobs lost in the economic downturn. It turned out their retirement plans were really pipe dreams.

"A lot of them didn't have plans -- their plan was the U.S. equities market was going to continue to rise at 30 percent a year and they didn't have to worry about it," said Rick Adkins, CEO of Arkansas Financial Group, a financial planning firm in Little Rock.

Financial experts have warned for years that Americans aren't saving enough for retirement and that many don't have a clue about how much money they'll need.

Boomers' problem has been arrogance, said Robert Reby, a financial planner in Danbury, Conn. "They said, 'We're smart enough to figure it out, we don't need help.'"

But boomers got a rude awakening from the dot-com crash, recession and Enron collapse, and financial advisers say they're now getting serious about retirement planning. "We have a number of new clients who had been in that mode and they recognize now that they need to have more concrete plans," Adkins said.

Many would-be retirees ask how they'll make up their losses, and whether they'll be able to do so quickly.

Saving more

Elaine Bedel, a financial planner in Indianapolis, said that unless the market quickly rebounds to its levels of two years ago -- something no market-savvy person should count on -- boomers and people a few years older will have to put more money aside or save for a longer period.

"Now, the question is, 'Am I saving enough?"' Bedel said.

Luckily for those 50 and over, changes in the tax law effective this year allow them to contribute an extra $1,000 to a 401(k) plan and an additional $500 to Individual Retirement Accounts in what are called "catch-up" provisions.

Financial advisers report another positive turn, a more realistic attitude about investments among many boomers. They're more willing to diversify and they're no longer turning up their noses at some investments previously seen as boring or too conservative, such as bonds.

"The average person is realizing that it's not a bad thing to have a bond, Treasury or corporate, or preferred stock," said Elizabeth Rivera, a vice president with the investment firm Stephens Inc. in Dallas. "They're not totally going away from the stock market, but they're looking more for quality."

Research and diversify

Reby recommends his clients adjust their portfolios to include value stocks, which have done well the last two years but are still expected to appreciate in the coming years. That's a big shift for boomers who focused on glamour stocks such as Microsoft and tech stocks that tanked.

"A lot of people make their decisions in too simplistic of a way. They make a commitment to things that have done well in the past," Reby said. "Some of my favorite investments of today have done poorly the past three or four years -- they're in the part of the business cycle where they do poorly."

Reby suggests boomers open their minds to an old way of thinking -- doing careful research and diversifying. "This is Warren Buffett stuff," he said, referring to the famed investor who has emerged from the stock market downturn with his fortune largely intact.

Boomer Larry LaPare, of Ridgefield, Conn., took a Buffett-style approach to investing, and now finds himself in the enviable position of having options. At 54, he has no plans to leave his job as president of a specialty food company, but when the day comes that he wants to retire, he'll have the means to.

LaPare began planning in earnest at 41, after being laid off. His portfolio is well-diversified, includes the bonds that many of his peers shunned and isn't overloaded on risky stocks. "Those years that everyone was making 30 percent, obviously I wasn't, but I understood what those municipal bond funds were there for," LaPare said.

Paying the bills

Many people in their 50s and 60s have been forced to rethink retirement because they've lost their jobs. They expected to spend the next few years saving more money, but now they're looking for work to pay the bills.

Tim Mygatt, of Danbury, Conn., at 62 wonders not only when he'll be able to retire, but also what kind of lifestyle he'll be able to have. He was doing high-tech consulting work, but the slowdown in the business wiped out much of his income. Meanwhile, his investments fell with the stock market.

Mygatt, whose wife is still working, is adapting to the uncertainty by "being more flexible about life and paying for life." For example, the couple sold their house in Westchester County, N.Y., a high-priced New York City suburb, and are currently renting and not planning to buy. That gives them some time to recoup their losses and more options in deciding where to live.

"You don't have to lock yourself in," Mygatt said. "That's helped."