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Sunday, September 30, 2001 - Page updated at 12:00 AM

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Retirees caught short by stocks return to work

The Washington Post

Five years ago, at 61, Bruce Oradei retired as an education lobbyist and began living in northern Wisconsin. But Thursday, Oradei returned to work as a substitute teacher.

Like many Americans, Oradei's retirement nest egg consists largely of stock. This allowed him to retire earlier, and richer, than he ever expected, amid the bull market of the late 1990s. But when the Dow Jones industrial average tumbled below 9000 on the first day of stock trading after the Sept. 11 attacks, he picked up the phone and inquired about a job.

The Dow's dive that day was the most recent blow in a brutal year for the stock market. His losses forced Oradei to change his retirement plans, something familiar to many people who have recently left the work force or who had hoped to do so soon.

They are not the most visible exemplars of the market's bull-to-bear whiplash — the fallen dot-com titans, chastened day-traders and former paper gazillionaires.

Yet the stock swoon has affected many older Americans more acutely than those who have more time to adjust their earning, investing and savings plans. In the 1990s, seniors were told, they were living in a New Economy, a world of seemingly boundless stock-market optimism.

The environment created a new calculus for retirement, altering expectations about how much money they would accumulate and when they could stop working.

Since the middle of last year, however, those calculations have been harshly revised. Oradei did some elementary math: His individual retirement account — a portfolio of Dow Jones industrial stocks — had dropped in value by nearly 40 percent.

He figured he needed to earn $1,500 a month to recoup his losses. Now Oradei plans to work full time for the school system of his hometown, Sun Prairie, Wis. "I will teach whatever age and subject they ask of me," he said.

Steve Jacobson, of Chevy Chase, Md., had expected to leave his job at Brian Logan Real Estate in Washington, D.C., in 2003. He planned to retire to Ocala, Fla., and join the woman he had been "dating on and off for about 25 years."

"We were planning a 'Florida marriage,' " said Jacobson, 64. "We were going to live together, not get married and collect two Social Security checks." This would supplement his savings, about 75 percent of which was in mutual funds and individual blue-chip stocks.

But his portfolio has lost half its value in a little more than a year. Barring a dramatic turnaround in the stock market, Jacobson said, he'll probably keep working for two more years.

This will hardly be the first generation of older Americans whose best-laid retirement plans have been thwarted by broader economic factors. In the 1970s, for instance, many people retired on fixed pensions only to have inflation eat away at their savings much faster than they had expected. Many had to return to work.

But in the past 20 years, the financial prospects of people in retirement seemed relentlessly bright. The income of retirees has grown more than twice as fast as that of pre-retirees, according to a survey by the American Association of Retired Persons.

This has been due largely to investment gains. But it also reflects a trend toward "phased retirement," in which workers leave their full-time jobs but work part-time for extra money.

More than 60 percent of workers say they plan to do some work in retirement, according to a study released last week by the Employee Benefit Research Institute.

But the stock boom of the late 1990s spurred many people to invest less conservatively than they normally would, investment advisers and financial planners said.

Rita Bregman, 59, became infatuated with the stock market in 1998. She took the proceeds from the sale of some real-estate holdings — $38,000 — and invested heavily in technology stocks, with highfliers such as Microsoft, America Online and Cisco. She had been living from paycheck to paycheck but suddenly owned investments that looked as though they would appreciate forever.

She had co-written a book of poetry and planned to stop working in a few years and travel. At the market's peak 18 months ago, Bregman, who is divorced, owned stocks worth $120,000.

"I should have sold then," she said, the famous last words of this volatile economic time.

Her portfolio is now worth $4,154.

She no longer gets cable television or has the newspaper delivered to her home. She goes to the hairdresser every eight weeks instead of every four. Fixing the transmission of her 1983 Volvo is out of the question. As is retirement, now or any time soon. She took a second job, working Saturdays in addition to her weekday job as an executive assistant at a nonprofit environmental-advocacy group in San Francisco.

"I wake up every morning and think, 'How long will I have to work? How much do I have to put away to ensure that I'm taken care of in case something happens to me physically?' "

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