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John Cooper, a music professor at the College of the Atlantic, was thinking of retiring soon. But the economic slowdown reduced his retirement account by $80,000 over one week in March. Now he is teaching lessons over Zoom and planning to work one more year.
“If I knew that we’d have a stable economy, I’d retire two weeks from now,” Cooper, 66, of Orono said. “But I’m not so sure.”
The economic downturn from the coronavirus outbreak creates unique problems for Mainers at or nearing retirement age. Maine has the highest median age of any state, with half the population over age 44 and one in five Mainers over 65, according to U.S. Census Bureau data.
Many seniors, like Cooper, have seen their retirement accounts take a significant hit as the stock market plunged dramatically in March due to the virus. Others are struggling to make ends meet and navigate an unemployment system that has challenged many Mainers.
Older workers now find themselves confronting the question of how much longer they want to work and how that intersects with their finances in the post-coronavirus world. It will depend on how quickly the economy bounces back from the economic shock that has left more than 100,000 Mainers out of work.
About 20 percent of Maine residents over the age of 65 — around 55,000 people — were employed either full- or part-time as of last year, according to federal data. As of mid-April, people over that age comprised a little more than 7 percent of the workers receiving unemployment benefits that have been beefed up by the federal government.
Saving for retirement posed a challenge for many Maine workers even before the coronavirus pandemic hit, Lori Parham, state director of AARP Maine, said. Maine’s economy is dependent on service jobs, which do not always provide workers with the option of saving via a 401(k) or other retirement account. Those jobs have also been hardest hit by the pandemic.
“The idea of having a secure retirement was out of reach for so many anyways, and now it’s going to become even more difficult,” Parham said.
For seniors with savings in a retirement account, the stock market drop in March meant a substantial financial hit. The average 401(k) balance dropped by 19 percent in the first quarter of 2020, according to Fidelity Investments, which manages retirement accounts.
Don Kleiner, 64, has worked as a self-employed guide for more than three decades. He expects his business, Maine Outdoors, to take a significant hit this year, as the 14-day quarantine requirement for travelers entering Maine discourages out-of-state tourism.
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“Certainly, this season is a loss,” Kleiner said. “It’ll take two or three years to come back. That makes me 68. How long do I intend to do this?”
As Maine workers consider how to time their retirements, the age at which they retire also affects the benefits they receive if they are eligible for programs such as Social Security, which about one-third of Maine seniors rely entirely on for retirement income, Parham said.
Some coronavirus legislation has tried to address the unique financial challenges seniors face. The $2.2 trillion stimulus package passed at the end of March included a provision suspending the required minimum distribution, the minimum amount of money that must be withdrawn from an individual retirement account each year.
Withdrawing from an account when the market is down reduces the value of the account by more than if the market was up, so suspending the minimum distribution helps preserve the value of seniors’ accounts in the long run. But the change only helps individuals who have an account and who can go a year without drawing money in it.
For people who have yet to retire, the legislation also allows individuals to withdraw money early from retirement accounts without a penalty. While retirement savings might provide a lifeline for jobless workers looking to make ends meet, earlier withdrawals risk substantially reducing the value of the account if the market bounces back soon.
Seniors are now having to take new stock of their assets. Doug Pope, who has owned and operated his own sailmaking company in Rockland for 25 years, had long planned to sell his business to fund his retirement.
He wants to “go out on a high,” selling when the economy is strong and his assets are at peak value. The coronavirus is delaying that.
“I may have to put it off a couple years and wait for that business cycle to come back,” he said.
Terry Shehata, 66, a University of Southern Maine employee who lives in Winthrop, is planning to retire in mid-2021, though he said he might wait a little longer if his 401(k) is slow to bounce back. He remembered friends who were forced to delay their retirements by as much as a decade after the housing market collapsed in 2008.
“You work hard for so many years and you’re just waiting to share the remainder of your life with your grandkids and your wife, and that has to be delayed,” Shehata said.
For Cooper, the music professor, it’s a financial and a personal question. He wants to end his career playing music with his students.
“They are not really at risk,” Cooper said. “I am at risk, because I am the old person. But I don’t mind. I’ll take that risk because I want to be in this classroom with my students.”
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