From the Editor: Time for a New Financial Game Plan

Photo by Brian Summers/Getty Images

Desperately, Danny watched from the sidelines as his 9- and 10-year-old basketball teammates were getting shellacked. They had scored only two baskets in the first two quarters, and the other team was scoring seemingly at will. In despair, he turned to his coach and pleaded, “Come on, coach. Do something!” It didn’t help. His overmatched team, the Double Rock Francos, scored only three more buckets by the end of the game.

With much higher stakes 24 years later, we’re all, like Danny and his coach, watching helplessly as personal savings and retirement game plans go awry, overmatched by the magnitude of the economic collapse.

In February, the stock market was down nearly 45 percent from its October 2007 high point, a $7 trillion loss in value—$5 trillion of that loss absorbed by those over 50. Housing values are down 20 percent, with most losses again borne by those over 50. In the past 16 months, the economy has trimmed more than 5 million jobs, and the unemployment rate among workers over 55 has more than doubled to 6.2 percent.

Then there’s the secondary impact—the “rebound effect.” It has three components: Older Americans have less time to recover their lost savings; they’re having to delay retirement; and they're finding it harder to get rehired if they've lost a job, in part because of the difficulty of persuading businesses to hire older workers.

No wonder we’re angry, especially after the huge bonuses paid to creative speculators whose handiwork undermined the global economy, and the trillion-dollar bailouts given to a financial industry whose greed has ravaged retirement savings.

But the stakes for 50-plus America don’t give us the luxury of anger. Instead, we must insist on the twin guideposts for recovery—an aggressive yet prudent strategy for reviving the economy and a credible regulatory and enforcement strategy for protecting everyone against future exploitation, corruption and waste.

Already, older Americans are adjusting their game plans. According to the latest survey by the Employee Benefit Research Institute, the percentage of those “very confident” of a financially secure retirement has dropped from 41 percent in 2007 to 13 percent today. Working longer is no longer a choice but a necessity.

The old strategy that retirement would be financed by steady income from Social Security and a company pension has been upended by today’s turmoil and the prospect of rising inflation, rising health care costs and rising taxes. We’re redefining retirement as we adapt our game plan to the new reality.

Danny, his teammates and their coach recognized their challenge and totally revamped their game plan. They learned discipline, tightened their defenses and showed some patience. By year’s end—wonder of wonders—the Francos won their Double Rock league championship.

There’s a lesson here. We need a back-to-the-basics recalibration of our strategy at all levels—by individuals, by business and by government. 

Jim Toedtman is editor and vice president of AARP Bulletin.