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Fallout of stock market's plunge: retirement woes

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But amid the worst environment on Wall Street since the Great Depression, that $63 hike might not seem like much to retirees and workers planning for retirement. For decades, US citizens have shouldered more and more of the risk for retirement savings, as defined contribution plans such as 401(k)s increasingly replaced defined benefit plans such as pensions. In good times, that shift seemed like a good bet, as equities rose. Now the meaning of that risk shift is becoming more fully apparent.

In past downturns, workers expected that a market recovery would restore their losses, said Rep. George Miller (D) of California, chairman of the House Education and Labor Committee, at an Oct. 7 hearing on retirement security. Given the magnitude of recent gyrations in the stock market, that may not be the case today.

"My sense is that this somehow is different," said Representative Miller.

If nothing else, many workers may feel that they will have to work longer than they had previously planned.

Take Cameron Beck, a claims representative at the Social Security Administration in Boston. He wants to retire in two years. But an economic downturn may force him to work longer, he says.

"I'm terrified my retirement monies will be depleted," Mr. Beck says.

He has not given up completely on investing in the stock market. But he won't move back into the market until he believes the bottom has been reached.

"You know what they say about investing – don't try to grab a falling knife," says Beck.

A new AARP survey of workers over 45 years of age found that 65 percent believe they will have to work longer if the economy does not improve. In this demographic cohort, whose youngest members can just begin to see retirement glimmering on the horizon, fully 69 percent added that it is likely they will spend less after they stop working, unless in the meantime good times return.

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