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Saving for Retirement

"My Retirement Savings Are Gone"

The solution: Trim expenses and keep socking away cash.

Douglas Paddock says spending time on his boat with his wife has changed his perspective on delaying retirement.

Douglas Paddock always thought he'd retire at 55. But having recently reached that milestone, he has yet to put down his briefcase. Paddock changed his plans after losing a chunk of his retirement savings during the market meltdown last year. Paddock now hopes to quit his day job in three years. And a crucial part of his new plan is powering down his expectations. "Through the years, I've come to see that being satisfied in retirement means being satisfied with less," says Paddock, who lives in Wilmington, N.C.

Like many baby-boomers, Paddock, a vice-president of financial planning at BB&T bank, has delayed his retirement after watching his portfolio shrink by 30% to 40%. According to a survey by Bell Investment Advisors, of Oakland, Cal., 60% of boomer investors have put off retirement by one to four years because of the plunge in the market. To cope with the setback, 78% of those surveyed plan to cut spending as well.


"I Lost My Job."

"I Owe More Than My House Is Worth."

"I'm Buried in Debt."

"I Can't Get Started."


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Cutting spending to increase savings is also part of Paddock's plan. To track expenses, he and his wife, Meyka, have started using personal-finance software. Meyka, a 48-year-old tax preparer, plans to join him in retirement in three years, and they hope the program will help them save more. Already, it has helped them cut spending in categories such as eating out and entertainment. "What's critical for us in the next three years is maximizing our savings," Paddock says.

As they clamp down on their expenses, the Paddocks will keep contributing to their retirement plans, which include 401(k)s, Roth IRAs and a SIMPLE IRA. By maintaining their contributions, the Paddocks share the approach of most investors. In an analysis of more than three million investors, the Vanguard Center for Retirement Research found that most participants in employer-based plans are still socking away money for retirement -- and investing in stocks.


Despite suffering steep losses, Paddock says, he still has faith in the market. Never a huge believer in bonds, he concedes that putting nearly all of his money in stock funds was an aggressive move. But he never thought the market would fall so far, so fast. At most, Paddock says, he thought he'd lose 20%.

As the Paddocks work to cut their spending, they face a decision about what to do with their house. In February 2007, when the stock market was still climbing, they bought a 3,000-square-foot, three-bedroom home on the North Carolina coast for $405,000. At the time, they viewed it as the perfect investment, so they put another $25,000 worth of upgrades into the place. If they could, they'd sell the house now to free up some cash. But the local real estate market is virtually frozen. And with a low, 5.5% rate on their 30-year fixed-rate mortgage, refinancing won't help. So they have to wait for buyers to come back.

Paddock says he's willing to be patient, and he's philosophical about delaying his goals. "A couple of things have changed my perspective," he says. For one thing, last year he was diagnosed with prostate cancer. That, along with the realization that he probably won't recoup the losses in his portfolio, has made him appreciate the simpler things in life. He and Meyka were inspired by new friends to buy an old 30-foot sailboat they found on Craigslist for $4,500. The boat, named "Miss M," after Meyka, provides an oasis of calm on the weekends, when they drop anchor in the local bays. "We now know we can be content with less," he says.



Put Your 401(k) Back to Work

Revive Your Retirement

Your Do-It-Yourself Pension

Always contribute as much as you can to your 401(k). In 2009, if you're 50 or older, you can put in $22,000. At that age you can also contribute $14,000 to a SIMPLE IRA. Particularly if you're 55 or older, don't stop funding your retirement, says Debra Neiman, a financial planner in Arlington, Mass.


If you've lost a big part of your savings, consider an annuity that guarantees minimum payouts regardless of the market's performance. You could get a 6% payout per year for the rest of your life no matter how the investment performs. If it does well, you could cash out after the surrender periodÑtypically three to seven years -- and invest it in whatever you want. But the fees for these guarantees can be steep. You can compare annuities at

Finally, monitor your savings. Frank Armstrong, author of The Retirement Challenge: Will You Sink or Swim? has developed a tool to help you determine whether you'll have enough.


"I Lost My Job."
"I Owe More Than My House Is Worth."
"I'm Buried in Debt."
"I Can't Get Started."

Listen to our Covercast: Surviving the Recession for a candid chat with our writers.