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Rethinking Retirement in a Changing Economy

For retirees, planning for tomorrow under today's conditions means finding ways to increase assets and reduce expenditures

The federal government has lowered interest rates to stimulate the economy and help mortgage borrowers, but the economic strategy has taken a toll for many savers — namely, retirees.

“The biggest problem for retirees is figuring out how they can maintain their lifestyle and stay retired,” said Seth Streeter, co-founder and president of Mission Wealth Management. “Assumptions that they made prior to retirement were made on a higher yield environment than exists today. They have to find a way to increase income, which comes with more investment risk, go back to work or minimize outflow, and find a way to cut back on expenditures.”

In 2009, the average annual investment income for the nearly 25 million households headed by people age 65 or older totaled $2,564, down 34 percent from 2007, according to the U.S. Department of Labor.

Streeter said that in the past, people over-relied on Social Security and pensions from employers to pay for retirement.

“When Social Security benefits were pushed back to a later age and taxation increased, retirees had a reality check. There’s a question as to whether they’ll even get what’s projected from Social Security,” he said. “Pensions have gone by the wayside. Issues started 10 to 20 years ago when people were not funding their retirement, and coupled with the challenging economic environment of 2008-09, assets have drastically eroded. Real estate is worth 40 percent less, and stocks are down 20 to 30 percent.”

Looking at the home as a type of asset is a major trend Streeter said he has seen among Santa Barbara retirees.

“If they’re 70 years old, they may say that by the time they’re in their mid-80s, they could be comfortable selling their home and buying a smaller home, renting or living at an assisted-living residence,” he said. “They’re tapping into the home as an asset.”

Streeter said that many people who moved to Santa Barbara to retire have a second home of other assets.

“Their lifestyle was such that they could shrink their assets and still have wealth. These kinds of retirees have been able to weather the storm better because of assets,” Streeter said. “The pain has not been as severe as it has in other parts of the state of country. There’s a difference between the pains of not being able to fly first class and the pains of not being able to put food on the table.”

Janet Garufis, president and CEO of Montecito Bank & Trust, agrees that Santa Barbara has fared better than the rest of the country, but that it has seen its own set of problems.

“We are a slow-growth community, so we don’t have many boom years, and when the bust comes, it’s not as significant,” Garufis said. “When a person is anticipating retirement and needs to supplement income, they may need to supplement with employment, but there are few job opportunities here. It’s a double-edged sword.”

Streeter and Garufis agree that planning is essential for retirees looking to increase assets and reduce expenditures.

“You need to have a third party take an objective look at your assets and liabilities to optimize what you already have,” Streeter said. “By helping retirees look at current investments and increasing yield, it will help their bottom line. Retirees need to talk to their banker, insurance representative, accountant and anyone else who handles their money to make sure that their taxes are integrated to maximize their investments.”

Garufis foresees retirees’ financial situation improving over the short term, but uncertainty looms in the future.

“During the short term, things are improving and economic indicators show good signs,” she said. “However, further down the road there’s more uncertainty, and that’s really the issue.”

Elder financial abuse is an unfortunate side effect of retirees’ precarious financial situation. Montecito Bank & Trust has worked to educate elder community members about fraud schemes that target them, including fake lotteries and contests.

“Many seniors are willing to take those risks, and the older a senior is, the less comfortable they are to ask for help,” she said. “We try to intermediate in those things and think it’s a really important responsibility.”

One silver lining to the current financial problems for Santa Barbara retirees is re-engagement in the community.

Joan Willicombe returned to the work force after retiring in 1993 from administrative work at UCSB. The 67-year-old found herself wanting to become re-engaged with the community after divorcing her husband and seeing her daughter off to college.

“I just kind of felt like I needed more in my life. And I’ve always been someone who really likes to be involved, so I looked around for how I could do that,” Willicombe said. “I had fewer resources than before, and Mission Wealth Management helped me understand the implications of my financial situation.”

Willicombe’s lifelong dream to become a marriage and family therapist came to fruition when she earned a master’s degree in clinical psychology from Antioch College.

“I went back and looked at some of the things I always wanted to do in my life but never did,” she said. “I always wanted to be a therapist but never quite finished my pursuit.”

After gaining the master’s degree from Antioch College, Willicombe landed an internship at New Beginnings Counseling Center, where she will complete 3,000 hours of required supervised internship hours to become a therapist.

“Retirement for me was not the end of anything but a transition from one thing to another,” Willicombe said. “I’m better equipped at being a therapist now because I’ve experienced so much in life. I know what it’s like to be an adolescent, and I know what it’s like to be 50 years old. When you’ve experienced the different stages of life, there’s an additional level of understanding.”

Willicombe said she believes that a fulfilling job should be a priority for retired people if they have taken care of financial needs.

“As a retired person, I think that once you have a place to live and basic nutritional needs taken care of, the best kind of work is work that affords some degree of pleasure,” she said. “If you want or need to build a new career or commit to anything time-consuming, it’s important that it tap into your passion and bring meaning, joy, satisfaction to your life.

“Even though the money is important, I think I would have done this anyway. It’s important to have meaning in your life, and I think this gives my life meaning.”

Noozhawk contributing writer Taylor Orr can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews. Become a fan of Noozhawk on Facebook.

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