Taking It All in Stride
Ardent savers Liz and Rob Cook of Woodland Hills watched Liz’s 401(k) retirement account drop by more than 20% before she pulled her remaining $245,000 out of the stock market in January. And Liz, a 52-year communication technician, says it would take more than analysts’ recommendations or congressional action to get her back in the market.
“I want to see the market go up for at least a month before I put my money back in, and then I think I’ll be cautious about getting in. I won’t put it all back at once,” Liz said.
“People say, ‘Put it back in now or you’ll miss the big run-up.’ But I think, ‘What if it becomes the big run-down?’ Rob says if I was brave I’d put my money in the market now, because it’s got to be at the bottom. And I said, ‘Yeah, that’s what they said a month ago. You can do whatever you want with your money.’ ”
Rob, 56, a rural postal carrier, has about $75,000 in his 401(k), which remains in the market. He sheepishly admits he’s been predicting the bottom for some time.
“I thought we were there at 9,000 (on the Dow Jones industrial average) and then at 8,500. I can’t imagine it going anywhere under 8,000, but then I didn’t think it would drop anywhere near 450 points today,” he said of Friday’s decline, during which the Dow actually fell below 8,000 for a time before closing at 8,019.26, down 390.23.
“It’s really a scary time, and I’ve given up on the analysts, even the ones I used to have so much faith in, because they seem to be as much in the air as we are. They’re just making excuses, the same ones they made two years ago. It’s hard to know what to do.”
Rob says he’s glad Liz pulled her money out of the market, even though it’s only earning from 2% to 3% in a fixed-income fund. His 401(k) is still invested in a Standard & Poor’s 500 index mutual fund, the fund Liz had invested in as well, and he figures that’s enough market exposure for the family right now. The vast majority of their retirement savings are in their 401(k)s.
Two years ago, when the Cooks were the subject of a Los Angeles Times Money Make-Over, Rob had about $115,000 in his 401(k).
“I’ve probably lost 40% of what I had, but I’m not thinking of pulling out. I can’t afford to, and I figure the market will always come back. I have a little time [before retirement]--three to five years--and I’m sure in that period it will come back. It’s just fortunate we’re both working. It’s nice to have two salaries while there’s so much uncertainty.”
Nonetheless, the market drop hasn’t really affected the quality of their lives. The Cooks still love to eat out. Liz is still addicted to crafting and Rob likes to buy cars.
“He went to the grocery store recently and I got a little worried because he was gone so long,” Liz said. “Then he called and said, ‘Can you pick me up? I just bought a car. It was such a good deal.... ‘ “
But their car payments are their only debt. The Cooks pay off their credit cards every month. Their $400,000 home will be paid off in September--two years ahead of schedule--and their daughter, Dana, is out of college. It took her a year, but Dana finally found a job in communication and will soon be living on her own.
“We know people who can’t afford to retire because they owe so much money,” Rob said. “There’s so much more personal debt than there used to be, and at some point I think it’s really going to affect everyone financially.”
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Jeanette Marantos
