February 1, 2012

What the Recession has Meant to My Retirement Lifestyle

I am the first to admit, I have been relatively lucky in weathering the effects of the recession of the last three years. By having no mortgage I have no fear of foreclosure. By having no credit card debt I have no fear of bankruptcy (unless a major medical problem crops up). By being almost eleven years into my satisfying retirement lifestyle I'm not worried about losing a job. Because I never worked for a company that provided health insurance or a pension I don't have to worry that my source of income will be cut or terminated because of some corporate problem.

So, a legitimate conclusion might be: "Mr. Lowry, you aren't affected at all. Your life is no different before or after the economic mess that started in 2008. You can't relate to our issues."

I strongly disagree. Because I don't live in a bubble my life has been directly affected. Let me count the ways:

Because of  of a massive falloff in business travel and conventions my youngest daughter lost a job she loved in a city she adored, San Diego. After trying all sorts of options for over a year, she landed a job in Phoenix. It paid well and was close to family. After 8 months, that job was eliminated and she was forced to move in with mom and dad. In a household set up for two people, adding a third made some major changes in our lifestyle. Now, 4 months later, she has begun to resurrect her career and is seeing promising progress in stabilizing her income. I would anticipate her moving out of our house and into her own apartment sometime in the next 3-5 months.


A little over 10 years ago we downsized from a 3200 square foot home to just over 1700 square feet. Our original plan was to move from our current two-story home to a single-story condo or town home a few years ago. We were both getting tired of the maintenance and repair issues that come with an older home. The work to maintain the backyard had gotten to the point where I had to hire a yard service. The quality of repair people is so marginal every fix became a major hassle.

The plans came to a screaming halt: the house lost 50% of it's value between 2007-2009. Since we didn't have to move I wasn't prepared to leave a few hundred thousand dollars on the table. So, the repairs continue while the housing market slowly begins to stabilize. I now hope we can move within the next 5-7 years. I don't expect to ever see the peak value of early 2007, but we will be happy to cut that drop in half.

Even though my investments tend to be conservative, that doesn't mean I didn't suffer loses. I have stayed away from any type of risky or single stock strategy since I began saving in my late 20's. Even so, my retirement fund had a 40% paper loss in less than a year. That induces some serious stress, no matter how well your life is going!

Since then, the account totals have built back up to just a bit higher than where they were when things went in the toilet. Of course, that isn't really true. I have lost almost 3 years of growth from the original level so I am really almost 3 years behind where I thought I would be. That means considering starting Social Security checks when I am 64 instead of my full retirement age of 66. That means vacation cutbacks. That means cutbacks in lifestyle, though a more simplified retirement lifestyle have meshed well with our changing desires.


As I detailed in the profile of our family's effort to life well on less in last October's Money Magazine, our budget has been cut by close to 30%. Earlier posts have detailed the elimination of cable and newspaper subscriptions, a tightening of our food and entertainment expenses, the delaying of a new car by several years, and a more significant reliance on free entertainment and the library (sorry Amazon!).

So, yes, the Great Recession has been a pain in the butt for us, not nearly as bad for many, but no walk in the park. However, I will quickly add that Betty and I see the experience as an actual positive. It has allowed us to:
  • Define what is really important to us
  • Eliminate things that weren't adding to the quality of our life
  • Become closer as we shared the problems and fears
  • Reinforced our earlier financial decisions and approach
  • Given me the chance to discover the world of blogging!

What Others are Saying

21 comments:

  1. Sounds like you made all the right moves, Bob! We've faired well in the recession because of where we live in North Texas, which hasn't been hit so hard by the downturn. We have a daughter too who lost her job but is re-establishing herself as a real estate agent, which is closer to what she wanted to do anyway. she didn't have to move in with us, but we've helped her out with money here and there. The rest of our kids stayed employed at good paying jobs through all this, so we are very fortunate.

    One thing it has affected though, is that we too planned to sell our 2400 square foot house that is too big for us and buy a smaller one to downsize. Since real estate has remained stagnant here, we didn't want to sell this house and lose money so we've stayed put for now. Still there are VERY good deals out there to buy another house right now and with our daughter selling real estate, this will probably be the year.

    We've managed to take advantage of the economic times by buying 2 rental houses with our daughter. We were able to get foreclosures very cheap, put some money into them to fix them up and then rent them for a good amount. The rental market is very good as many people can't qualify to buy right now.

    Whatever happens, there are ways to look at the situation and figure out how you can prosper in it. Many companies founded during the depression of the 1930's are still around today!

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    1. Our situations sounds quite similar, Joan. We owned 4 rental houses in the late 90's that worked well for us, but I became tired of the landlord hassles. I'm glad we sold them when we did. The apartment market in Phoenix is strong but there are so many good deals with all the overbuilt complexes I'd have a hard time getting enough rent to cover a mortgage and maintenance.

      Making do during downturns, or even prospering is as you say: look carefully at the situation and see if there is anyway to fill a need or solve a problem. If nothing else it gives you a opportunity to adjust your own lifestyle.

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  2. Speaking to a couple of your parting "positives", I agree that tightening the belt can also serve as an opportunity to reassess what is truly important.

    Much of the economic boom-time was based on over-expansion, over-confidence, and over-spending. It was truly a bubble that had people overextending themselves financially in the belief that more equaled better and happier.

    Nevertheless, I am still quite saddened at the difficult circumstances of so many hardworking people. And angry at the manipulations of Big Business and Wall Street to make it look like they had nothing to do with the whole phenomena.

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    1. It is probably true that those most damaged by the actions (or lack of actions) of those in control will never recover to where they were. The playing field seems to have permanently shifted and society has turned into a win-lose game instead of win-win.

      It is upsetting and sad, but reality.

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  3. This was an eye-opening post, Bob. At first, I would have agreed that the bad economic turn didn't affect you. Unfortunately, it trickles down to those who *prepared* too. It makes me wonder if I'll ever reach financial independence..or if I'll have to bring in some sort of income the rest of my life.

    Retirement has changed a great deal since my Dad's retirement from the telephone company 18 short years ago. I remember he was offered a buy-out package back then, and he dragged his feet. At 62, he still wanted to work, but decided to go for it anyway. The package included a great pension, healthcare and cash. My husband and I have our 401K and possibly social security. At age 50, I'm *entitled* to send $22,500 tax free dollars to retirement, but I have to say, I'm a little hesitant to let Wall Street handle my retirement money.

    I hope things start looking up soon!

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    1. Ever since I started investing I have never played the investment "game" the way many folks do. I have always been conservative, even during phases like the dot.com bubble. If everything is going up I don't jump in with both feet because I know it is coming back down again. I have never tried to "time" the market: that to me is a fool's game.

      Investing your money is the only way to to stay ahead (or at least even) of inflation. My only caution is to diversify and don't necessarily follow the common wisdom. Determine your risk tolerance and don't exceed it.

      I agree with you, Sharon. Retirement is not likely to ever go back to the way it was. Too much has changed. Is that a bad thing? Not necessarily, it is just the way things are. Adapt to it and we'll be fine. Wish for the "good old days" and we will suffer.

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  4. The September 2008 stock meltdown was a shock for both my husband and myself, and left us permanently altered. Previously we had both been under the false impression that we were "safe" because we had done our due diligence and had $XXX saved. September 2008 taught us that no such "safety" net existed, and really never had.

    The immediate impact on the stock meltdown is that we felt we had to push out our early retirement plans by, as it turned out, three years. The more subtle, but longer lasting, impact was a complete shift in how we viewed the overall financial world. We stopped assuming our savings would forever be adequate in meeting our early retirement financial needs, and initiated a series of financial contingency plans that we could fall back on in the event of future meltdowns.

    In retrospect, I think we are stronger, more grounded in what really matters, and better off overall in our attitude toward money for having gone through these last few painful years.

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    1. The financial meltdown opened a lot of eyes, so in that aspect it was a good thing. But, I continue to see reports that way too many of those in their 30's and 40's are still lagging seriously behind in savings. Their argument seems to be that they will never retire. That is as risky a stance as not saving. It assumes good health, salable strengths, and the ability to continually update one's skills well into your 8th decade.

      Your experience, Tamara, turned out well. Congrats to you and hubby.

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  5. Great post. Thanks for sharing your experience. My husband is still working and we still have one teenager left at home. More people at his work have postponed their retirement because of the stock market and what it did to their portfolio. I think the recession has been good in many ways. People were so caught up on the treadmill of materialism and debt and now they are stepping back a little bit and refocusing on what really matters. It hasn't happened to everyone, and many people will just get back on the treadmill as things get better, but it has made others jump off the treadmill and reflect about what they really want in life. It doesn't cost money to read, serve others, or spend time with your family. As long as you have enough funds to pay your bills and eat, you can find other ways to enjoy life if there isn't a lot of money left. I am feeding our family for $50 per week and find that the limit has made me analyze what I was buying and make changes to only buy the best foods that I can afford. Chips, soda, and processed foods cost too much. Plus, I like real, homemade food. I don't spend time couponing, but we still eat well on our budget. It gives me freedom to do other things since I have more money available since I spend less on groceries.

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    1. $50 a week food budget for a family of three...that is great! I just clicked over to your blog and see you have all sorts of practical tips to keep the budget under control. If you'd like to share what food you buy in a week, I'd love to know. Our budget is twice that and I'd love to find ways to cut it without harming the quality of what we consume. We don't do soda or processed foods, but still....

      Getting off the consumer treadmill will help not only the individual but society overall. Our economy must shift away from being consumer-driven if we ever hope to dig our way out of debt. It is painful, but necessary for our long term health and well-being.

      Thanks for visiting. I'll have to put your site on my check list!

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  6. So nice to hear details and concrete examples of things you did and what happened.We are both working(57yrs)and will continue for awhile,how long exactly unsure.We bought small 1286sq ft cape cod on 1 acre(bought and paid for approx 2005).No lavish lifestyle, last vacation 2007 next one unsure when.We do all the boring things like pack lunch every day,cook from scratch,plant veggies,go to public market evry saturday.Splurges are Dunkin Donut coffee and meeting friends for breakfast on the weekend.I work 2 jobs my husband 1 plus he takes on all the extra work at home.We have 401K and 403b accounts(thru our jobs) down by 40% funds are limited by employer.No fancy hobbies or expensive toys.I am a planner, we account for every dollar coming in and going out.We paid cash for daughter's education,wedding etc.chose to have 1 child by plan.Have worked for our employers for 30 plus years and both of us have nice defined benefit pensions from a hospital.Luckily we both are very healthy and have wonderful health coverage.I worry for my daughter,son-in-law and my grandchild coming this year.Both DD and SIL each have 2 masters, been married 6yrs and waited to start their family.They live frugally but it seems so much harder for young couples.We spend $70 on groceries and 25-30 at public market for 2 people but it goes far so not every week do we spend that just when we are "stocking up" on basics like toilet tissue,laundry soap etc.We share fruits and veggies,we share food like DD bakes and I might make a soup then share each.We share the BOGO for like Kashi with coupons, buy organic milk,greek yogurt.No beef no pork etc only fish, sea food,veggies ,grains small amounts of dairy no soda no processed foods 1 six pack of Killian's last more than a week and 1 bottle of wine for drinking and cooking lasts 2weeks or so.Love coffee so we buy beans and grind.Clothes are as needed and we have bought great quality coats that last for years.Same with furniture so not alot of buying necessay.

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    1. I really enjoyed your detailed recounting of how you are living and spending. There are always lessons to be learned from someone else's experiences. I love coffee too but buy the cheapest generic. Your comment made me think about upgrading to a better quality blend.

      Your retirement planning and investments, plus the blessing of job health care should allow you and hubby to retire without major worries. Even though the accounts are down, you will probably have another 7 or 8 years of work for them to build back up. I envy you the health coverage.

      Younger people today do face a tough road. The "rules" have changed so dramatically that planning for the future needs to be approached differently. It is likely the majority of younger folks will have to fund their own retirement and find their own health coverage. The days of company-funded 401(k) accounts are probably numbered.

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  7. Bob,

    I always see such good advice on your posts and then realize how my husband and I are still "risk-takers." We are both 54, and as you know, I always think, there are options if we are willing to move to a cheaper part of the U.S., or even outside the U.S. where healthcare costs are so low. I know I'm a dreamer.

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    1. Risk is something that must be defined by each person. What you might consider Conservative might strike me as crazy-risky, and vice versa. It is important to understand your own tolerance to prevent yourself from flying into a panic every time the market starts swinging around, while not being so scared to take a chance you slip further behind because of inflation. It isn't a simple choice, I'm afraid.

      You do live in an expensive part of the country (as do I). You have had a very positive experience in a much cheaper part of the world. I won't be surprised if someday you announce a "gutsy move" to somewhere in South America!

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  8. Bob,

    You're right about each person having a different tolerance level towards risk. I know we shall not stay in Orange County for the rest of our lives. In fact two nights ago I watched HGTV and, as you may know, the houses they show are usually more expensive than what you'd pay if you were in the country. I have suddenly discovered how much I like Britanny. The beautiful old stone houses, which have been modernized inside, are affordable. As I speak French, this may be another option. Just an idea. P.S. Thanks for voting for Dodie Cross' "My Gutsy Story." Please can you click on her name on the sidebar so it registers for her.

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    1. Brittany? If you move soon you could spend more time with your dad in Paris! Brittany is rather rainy but from what I remember very green.

      I voted for Dodie on the side bar!

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  9. This is really illuminating, Bob. I find it shocking that your house has lost 50% of it's value in two years. Yikes! I live very simply so my life is not as impacted in certain ways, but I know my house has lost value too. Everything changes so I'm looking forward.

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    1. There was a huge run-up in housing prices in Phoenix in the early to mid 2000's. Our home had almost tripled in price. It was never worth what the "market" said it was, so falling the way it did brought the price back down to a reasonable level. Even so, I won't sell until the market begins to grow again. I doubt we'll ever see the silly prices of 2006 but I want afford to wait for some increases.

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  10. I've struggled all my life with making ends meet so a recession is just another day in the park for me. But what I like most about this current recession is that it leveled the playing field for me. I no longer have to be ashamed or explain my frugality to anyone because now we are all in the same boat. No one has granite countertops or stainless steel appliances anymore, BMW's or designer shoes and handbags. We all are shopping side by side at Goodwill, thrift shops and clipping coupons. LOL!

    The only difference this recession is to other recessions is that my frugality was voluntary. Now, it's mandatory. The other difference I have duly noted (and do NOT like) is watching my style of living decline through no fault of my own! No matter how hard you work or how ingenious you are in investing, I just can't seem to climb up the financial ladder anymore. Before, I was able to put aside money and save up for things. Now, I can just barely maintain what I already have. I don't like it and have verbalized my disdain loudly.

    I found that the only way I have been able to sustain my retirement is by continuing to work at part time jobs to supplement my other income.

    Ugh.

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    1. Every point you make Morrison is valid and on-target. Personally, I don't mind a simplified lifestyle, but it isn't really something I could change if I wanted to at this point.

      We discussed this very issue in our church small group meeting last night. The lives of the folks who still worry about the fancy homes, cars, clothes, and status symbols giving their lives meaning and importance are the most unhappy people you will meet. They are swimming against the tide all the time and have to spend more and more just to stay level. They have yet to accept the world has changed.

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    2. Bob, yes indeed. The world has changed and our lives, the way we remember them, are never coming back.
      Am I happy? Yes, of course. Just to be alive is a very good thing.

      At least we were able to experience the ups as well as the downs.

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