May 4, 2001

Older investors delay retirement, await Wall Street rebound

Business Report Correspondent

While the stock market soared in the late 1990s, young dot-com workers who were worth millions on paper planned to retire at the ripe age of 34 and live out the rest of their days in Bali or Tahiti. As 2001 dawned, many of those same millionaires were suddenly worth pennies on the dollar, had moved back in with their parents and had taken jobs as night-shift managers at the gas station/bowling alley combination Fill n’ Bowl Emporium where they once worked as teen-agers.

“There’s no question that some people in the late ’90s got too aggressive, and it wasn’t right for them,´ said Greg Parr, branch manager of American Express Financial Advisors Inc. in Boulder.

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At least young folks have decades to recoup their losses and make smarter investment decisions in the future. But if retired investors or those approaching their golden years decided to bank all their savings on Yahoo! or Priceline stock, both of which have dropped more than 80 and 90 percent, respectively, in the last year, they may have ended up in a financial abyss without enough time to recover.

“I have a few clients that were banking on having investments that would produce steady income for them, and then they had to scale back a bit,´ said Parr, referring to some of his clients in the 60- to 65-year-old age bracket. “The money they had expected to draw as income didn’t materialize like they thought, and they may have to postpone or delay their retirement plans.”

Dave Darmour, owner of Peregrine Investment Management and Wealth Advisors LLC in Boulder, has also seen people nearing retirement forced to adjust their long-term plans due to market turmoil. “I’ve got a couple of people who are planning on working another year and hoping this bounces back a bit,” he said.

Norm Wolff, a market analyst for A.G. Edwards & Sons in St. Louis, a financial planning company that has an office in Boulder, said that even normally staid investment vehicles such as pension plans were influenced by the euphoria on Wall Street a few years ago. “A lot of pension profit-sharing plans can be allocated among several different kinds of funds,” he said. “Suddenly, there was a push among employees to get more aggressive managers out there running those plans.”

It was all part of the “irrational exuberance” of the late 1990s that Federal Reserve Chairman Alan Greenspan warned Congress about. It led people to ignore timeworn rules of investment. “One of the dilemmas was that the Internet bubble was so enticing on the way up that people took money from conservative funds and put it into tech stocks,” Wolff said. “Then, the bubble burst.”

Robert Gorson, 78, who lives in a retirement community in Boulder, is a self-admitted speculative investor who has taken a bit of a tumble with the recent market downturn. “I do have a huge paper loss in my discretionary funds, but I fully expect to recover that within six to nine months,” he said.

The key to his retirement strategy, said Gorson, is that he didn’t put all his eggs in one basket. His losses now are connected to his discretionary income, not the money he has already set aside for immediate living needs.

“You take the part of the retirement fund that you need to survive, and put that in something safe, like long-term government bonds,” Gorson said from his office, where he tracks the market on television, the Internet and the Wall Street Journal. “A big chunk of my funds is in government bonds, so that even if we lost everything else, we would have enough to survive.”

Same goes for Keith Ames, 70, a retired architect in Niwot. He is not influenced much by gyrations in the stock market because most of his money is tied up in real estate, which has been increasing in value in the Denver metro area during the last decade. Furthermore, he relies on a steady stream of income from rental properties and mortgage payments that he receives from property he has sold.

“Everything is paid for, so if everything goes to hell, I’ll be alright,” Ames said, and then added with a chuckle. “I can always get a job riding around on the back of a garbage truck if need be.”

Most financial planners and counselors in Boulder County said that retirees can fairly easily avoid sudden financial hardship from the start if they follow some basic investment tenets. “I tell clients ?Let’s talk about correct allocation, let’s talk about diversifying the portfolio,’ ´ said Kathy Leonard, president of Leonard Financial in Boulder.

While there are examples of retirees in Boulder County who invested unwisely, financial planners say that they manage their clients’ money using a long-term perspective that shields them from economic ruin when the market heads south for a while. “People should have a financial plan whether they’re in retirement, near retirement or at any other point in their lives,” Darmour said. “And they should stick with that plan.”

“I don’t have any clients who had 50 percent or more of their portfolio in technology stocks,´ said Leonard, about half of whose clients are retired or near retirement. She advocates a safe portfolio allocation strategy whereby money is invested in stocks, bonds and cash, not just in risky, high-yielding investments.

While she did experience a higher call volume in March as the Nasdaq tumbled below 2,000, Leonard told her clients to put the market plunge into historical context. After a downturn of this severity, markets have often rebounded at a rapid pace, and that panicking when stock prices are scraping bottom is like bailing on the market during the “darkness before dawn” period.

“If they are not comfortable, then we have to slightly adjust their allocation to something more conservative,” Leonard said.

Parr agreed. “We tell most of our clients to be patient, and that the market will come back,” he said. “Most people are philosophical about it because they have a long-term viewpoint.”

Ames, the retired architect in Niwot, said that at some point the issue of careful investment decisions at his age becomes an academic one. He said, “It gets to the point where you can’t invest for the too, too long-term.”

Contact John Aguilar at (303) 440-4950 or e-mail jaguilar@bcbr.com

Business Report Correspondent

While the stock market soared in the late 1990s, young dot-com workers who were worth millions on paper planned to retire at the ripe age of 34 and live out the rest of their days in Bali or Tahiti. As 2001 dawned, many of those same millionaires were suddenly worth pennies on the dollar, had moved back in with their parents and had taken jobs as night-shift managers at the gas station/bowling alley combination Fill n’ Bowl Emporium where they once worked as teen-agers.

“There’s no question that some people in the late ’90s got too aggressive, and it…

Christopher Wood
Christopher Wood is editor and publisher of BizWest, a regional business journal covering Boulder, Broomfield, Larimer and Weld counties. Wood co-founded the Northern Colorado Business Report in 1995 and served as publisher of the Boulder County Business Report until the two publications were merged to form BizWest in 2014. From 1990 to 1995, Wood served as reporter and managing editor of the Denver Business Journal. He is a Marine Corps veteran and a graduate of the University of Colorado Boulder. He has won numerous awards from the Colorado Press Association, Society of Professional Journalists and the Alliance of Area Business Publishers.
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