Money Makeover: Couple nearing retirement contend with long unemployment
Like many baby boomers looking for steady work, Rafael Martinez has been stuck in his own personal recession.
Reverberations from the economic crash wiped out his career as a high-earning salesman.
Since then, he has endured long spells of unemployment broken by short-lived work that didn’t pay well. His wife, Elva, kept the couple going with two part-time jobs.
Now, Rafael, 61, and Elva, 57, are worried about paying their mortgage and other bills — while leaving enough to retire.
Financial planner Carol Somoano, who reviewed the couple’s situation, said their goal of a comfortable retirement is within reach if they can keep working until age 66, live frugally and save diligently. The biggest thing going for them, she said, was the decision they made 11 years ago — when times were much better — to refinance the mortgage on their Arleta home.
The pair reduced the loan term to 15 years, which increased their monthly payments but decreased their total payout over the life of the loan. In addition, they didn’t tap their equity — as so many did before the housing meltdown.
That 2004 refinancing “was probably the best financial decision they ever made,” Somoano said.
Now, the prospect of a paid-off home is an essential element of their retirement plan.
The Great Recession and its aftermath were hard on people in Rafael and Elva’s generation.
Those older than 45 who lost their jobs during the last five years have had trouble finding work, and those who got new jobs often didn’t receive the hours and wages that they did in their old positions, a recent study by AARP found.
Last year, 45% of unemployed people ages 55 and older spent at least 27 weeks looking for a job, according to the report, released last month.
“Many end up accepting jobs at lower pay, with fewer hours and with limited benefits,” said the report, based on a survey of nearly 2,500 people ages 45 to 70.
Rafael Martinez arrived in California from Mexico in 1980, and started washing cars for $25 a day. Later, he repaired car bodies, worked for a printing company and sold vitamin supplements.
Along the way, he and Elva married. He became a U.S. citizen.
In the early 2000s, Martinez found his niche as a salesman for an herbal tea company. His income averaged $85,000 to $90,000 a year, although workdays frequently stretched to 12 or 14 hours.
As the recession approached, Martinez found sales harder to come by. His 2007 income fell below $56,000.
Shoppers kept a tight hold on spending even after the recession ended in June 2009, and many consumer products companies suffered. When the layoff came in 2011, Martinez said, he thought finding a new job would take only a few days, certainly not more than a few weeks.
He tried to work his contacts. Acquaintances — even people he had helped find work — seemed to behave as though his unemployment might be contagious.
“I couldn’t get them on the telephone,” Martinez said. “If I did, they said they were busy and would call me back. They never did.”
He turned to Chrysalis, a nonprofit organization dedicated to helping the poor, homeless and long-term unemployed find jobs. The Los Angeles group’s services include helping develop a job search strategy, filling out applications, writing a resume and cover letter, and preparing for interviews.
Martinez learned to find the positive in his life: His wife, Elva, earned about $2,150 a month as a certified nurse assistant and part-time caregiver. Their two grown sons were on their own and doing well. The couple still had their 1,400-square-foot home, which was worth more than the mortgage they paid faithfully every month.
In 2014, Martinez found a job selling mattresses. It paid about $26,000 a year but lasted only a few months before he was laid off again.
Martinez applied for five more jobs without success before a used-car chain gave him a try as a salesman. Martinez said it pays slightly above the minimum wage, with success depending on his commissions on car sales.
“I’m grateful for the opportunity,” he said.
Despite their travails, the Martinezes have done several things right, Somoano said. They maintain a thrifty lifestyle, with low-cost hobbies that include hiking and gardening. And they have minimal debt other than the mortgage.
Still, the couple fell short on meeting expenses by about $350 a month when they were relying on Elva’s income and Rafael’s unemployment checks. The couple ran up some credit-card debt and tapped a modest IRA, reducing it from $30,000 to $21,000.
They also haven’t been able to save money. Experts usually recommend setting aside enough to cover three to six months of expenses.
Tighter budgeting is part of the answer.
“They should start tracking all income and expenses on a spreadsheet,” Somoano said. “I recommend that they do not incur any credit card debt and work on increasing emergency fund savings.”
Earning more is the other part. Somoano advised Rafael to keep working, even knowing that there may be a succession of short-lived jobs, rather than one that will carry him through to retirement.
“He needs to try to make about $25,000 a year,” Somoano said. Added to Elva’s income, the couple would have about $50,000 coming in annually.
With traditional retirement age approaching, the importance of their 2004 refinancing is clear. The Martinezes owe less than $47,000 on a home worth about $380,000, Somoano said. They bought the three-bedroom, two-bath house in 1994 for $168,000.
If they continue to make their payments regularly, the couple should have the home paid off by 2019, just before Rafael turns 66.
“He could choose to retire at 62, but I wouldn’t recommend it,” Somoano said. “If he can work until 66, his Social Security income will be nearly $500 a month more than it would be at 62, or nearly $1,900 a month.”
Somoano said retiring at 62 would also mean that the couple would probably have to sell their home before they were out of their 70s.
“They have worked so hard to keep that home for retirement,” she said. “I wouldn’t want to see that happen.”
When Rafael reaches 66, Elva will be 62, “and then there will have to be a discussion about whether she should retire or keep working” to build her own Social Security benefits, Somoano said.
“The key,” she said, “is they still have time to overcome his long period of unemployment.”
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