Baby boomers dial back on retirement contributions on clarkhoward.com

A recent AARP study found that 1 in 5 baby boomers have stopped contributing to their retirement accounts. People are losing their nerve in the face of the market as money evaporates right before their eyes. This is an understandable reaction and may even feel rational.

After all, we make financial decisions using a rearview mirror as a predictor of the future. During the "dot-bomb" era, the average American believed the market would climb 20% a year forever! But things eventually collapse back to true market value. Today, the NASDAQ for tech stocks is only at 36% of its peak. Some baby boomers have even had to continue to work because of bad bets in the dot-bomb era. Think how few of the '90s Internet-era companies survived.

When he jogs, Clark's wife calls him "the Turtle" because it looks like slow-motion video. Clark calls it "waddling" -- instead of running. Likewise, he waddles through financial life too; he's well diversified and he contributes every pay period -- in a word, dullsville. But he didn't get hurt by the dot-bomb fallout.

Those who swore off investing after the dot-bomb doldrums missed out on the recovery. They moved on to real estate, and we all know how that ended up. Today, Clark continues to invest exactly as he did before all the market turmoil of the recent weeks and months.

So you should know that human nature is at work conspiring against you when it comes to planning for retirement and investing. Yet the reality is that there's a better chance to make money today by getting into multiple investments than there was in the late '90s. You're missing out if you get out of the game. Now is the time to buy things extra cheap when nobody wants them.

What others are saying

401k
It is not good to go aggresive during the bear market. Hold, as much bonds, as you can, even if it means in proportions, and then go agressive on a upward traint.
By MP @ 10/08/08 05:19:52 PMreport abuse
Boomer Contributions.
The market has returned very little over the past 20 years. That's a poor return when you consider the risk you take holding stocks.
Have you looked at your 401K balance lately? See what I mean.
I'm a boomer, and I notice many of us who have some assets have taken the necessary steps to hold onto what we've accumulated. That means cutting way back on stock.
Ever wonder why "stock" and "stink" are so close?
By Vic @ 10/08/08 03:23:00 PMreport abuse
everyone is cutting back
U.S. Consumer Credit Dropped by the Most on Record (Update1)
By Vincent Del Giudice

Oct. 7 (Bloomberg) -- Borrowing by U.S. consumers unexpectedly fell in August by the most on record as banks shut off access to loans, a report from the Federal Reserve showed.

Consumer credit fell by $7.9 billion, the most since statistics began in 1943, to $2.58 trillion, the Fed said today in Washington. In July, credit rose by $5.2 billion, previously reported as a $4.6 billion gain. The Fed's report doesn't cover borrowing secured by real estate.

Consumer spending, the biggest part of the economy, is likely to keep faltering as banks hoard cash, job losses mount and property values drop. The decline in borrowing underscores why Fed policy makers today announced they will create a special fund to purchase commercial paper in a bid to open the flow of credit to the nation's businesses.

''This is what happens when consumers are fearful and banks tighten lending standards to all applicants,'' said Richard Yamarone, chief economist at Argus Research in New York. ''No one borrows, no one lends. It's a classic example of a frozen credit channel.''

Economists forecast an increase of $5 billion in consumer credit during August, according to the median of 29 estimates in a survey conducted by Bloomberg News.

According to the Fed, total consumer borrowing dropped at a 4.3 percent annual rate in August, the most since January 1998, during the Asian financial crisis.

Revolving debt such as credit cards decreased by $612 million during August and non-revolving debt, including auto loans, dropped by $7.3 billion.

Late Payments

The number of credit card bills paid late increased in the second quarter, according to the American Bankers Association, rising to 4.54 percent from 4.51 percent in the first quarter. The average bank card delinquency rate over the last two years is 4.44 percent.

Discover Financial Services, the credit-card company spun off from Morgan Stanley, said third-quarter profit declined 11 percent as late payments increased, the Riverwoods, Illinois company announced Sept. 25. Discover has lost almost half its market value since it was spun off in June 2007.

Figures released last week show auto sales tumbled 27 percent in September as the credit crisis and slowing economy dragged the industry to its worst month since 1991.

A quarterly Fed report issued on Sept. 18 showed household wealth fell from April to June for the third consecutive quarter and borrowing slowed as home prices dropped and lenders pulled back. Net worth for households and non-profit groups decreased by $438 billion in the second quarter to $56 trillion, the lowest since the end of 2006, according to the Flow of Funds report. Real estate-related assets declined by $258.8 billion, following a $299.5 billion loss.

To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

Last Updated: October 7, 2008 15:20 EDT
By mark @ 10/07/08 09:40:23 PMreport abuse
401K
I JUST STARTED INVESTING INTO MY 401K ABOUT 3 MONTHS AGO. I AM PUTTING IN THE MAX THAT MY COMPANY MATCHES AND I HEARD THAT GOING AGGRESSIVE IN THESE TIMES IS THE RIGHT THING TO DO. WOULD THAT BE CORRECT?
By SANDMAN @ 10/07/08 06:58:37 PMreport abuse

401k

It is not good to go aggresive during the bear market. Hold, as much bonds, as you can, even if it means in proportions, and then go agressive on a upward traint.

By MP @ 10/08/08 05:19:52 PMreport abuse

Boomer Contributions.

The market has returned very little over the past 20 years. That's a poor return when you consider the risk you take holding stocks.
Have you looked at your 401K balance lately? See what I mean.
I'm a boomer, and I notice many of us who have some assets have taken the necessary steps to hold onto what we've accumulated. That means cutting way back on stock.
Ever wonder why "stock" and "stink" are so close?

By Vic @ 10/08/08 03:23:00 PMreport abuse

everyone is cutting back

U.S. Consumer Credit Dropped by the Most on Record (Update1)
By Vincent Del Giudice

Oct. 7 (Bloomberg) -- Borrowing by U.S. consumers unexpectedly fell in August by the most on record as banks shut off access to loans, a report from the Federal Reserve showed.

Consumer credit fell by $7.9 billion, the most since statistics began in 1943, to $2.58 trillion, the Fed said today in Washington. In July, credit rose by $5.2 billion, previously reported as a $4.6 billion gain. The Fed's report doesn't cover borrowing secured by real estate.

Consumer spending, the biggest part of the economy, is likely to keep faltering as banks hoard cash, job losses mount and property values drop. The decline in borrowing underscores why Fed policy makers today announced they will create a special fund to purchase commercial paper in a bid to open the flow of credit to the nation's businesses.

''This is what happens when consumers are fearful and banks tighten lending standards to all applicants,'' said Richard Yamarone, chief economist at Argus Research in New York. ''No one borrows, no one lends. It's a classic example of a frozen credit channel.''

Economists forecast an increase of $5 billion in consumer credit during August, according to the median of 29 estimates in a survey conducted by Bloomberg News.

According to the Fed, total consumer borrowing dropped at a 4.3 percent annual rate in August, the most since January 1998, during the Asian financial crisis.

Revolving debt such as credit cards decreased by $612 million during August and non-revolving debt, including auto loans, dropped by $7.3 billion.

Late Payments

The number of credit card bills paid late increased in the second quarter, according to the American Bankers Association, rising to 4.54 percent from 4.51 percent in the first quarter. The average bank card delinquency rate over the last two years is 4.44 percent.

Discover Financial Services, the credit-card company spun off from Morgan Stanley, said third-quarter profit declined 11 percent as late payments increased, the Riverwoods, Illinois company announced Sept. 25. Discover has lost almost half its market value since it was spun off in June 2007.

Figures released last week show auto sales tumbled 27 percent in September as the credit crisis and slowing economy dragged the industry to its worst month since 1991.

A quarterly Fed report issued on Sept. 18 showed household wealth fell from April to June for the third consecutive quarter and borrowing slowed as home prices dropped and lenders pulled back. Net worth for households and non-profit groups decreased by $438 billion in the second quarter to $56 trillion, the lowest since the end of 2006, according to the Flow of Funds report. Real estate-related assets declined by $258.8 billion, following a $299.5 billion loss.

To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

Last Updated: October 7, 2008 15:20 EDT

By mark @ 10/07/08 09:40:23 PMreport abuse

401K

I JUST STARTED INVESTING INTO MY 401K ABOUT 3 MONTHS AGO. I AM PUTTING IN THE MAX THAT MY COMPANY MATCHES AND I HEARD THAT GOING AGGRESSIVE IN THESE TIMES IS THE RIGHT THING TO DO. WOULD THAT BE CORRECT?

By SANDMAN @ 10/07/08 06:58:37 PMreport abuse

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Oct 07, 2008 -- Baby boomers dial back on retirement contributions

What others are saying