- The Washington Times - Tuesday, July 23, 2002

Investors say they are staying in the stock market despite losses that have crippled the income of some retirees and prompted younger investors to rethink early retirement.
Harold McCann, 70, who retired 12 years ago, said that even though he and his wife have lost an estimated $300,000 in their 401(k) retirement plan and various stock investments, they intend to "sit on present investments."
"If I were younger, I'd probably try to recover my losses, but now I'm at an age where I hope I'll die before I run out of income," Mr. McCann said at Ronald Reagan Washington National Airport yesterday.
While he was speaking, the Dow Jones Industrial Average lost 235 points to close at 7,785.
Mr. McCann, 70, said he and his wife, who asked not to be named and didn't want their residency disclosed, plan to cut travel and living expenses, "hoping the economy will bounce back but not expecting it."
As the stock market continues to plunge the three major indexes have posted double-digit losses in percentage points this year and have wiped out nearly $8 trillion of stock wealth since 2000 individual investors say they are looking at their mounting losses and planning their next steps.
Instead of switching to safe-haven Treasury bonds or certificates of deposit, most investors are keeping their stocks, IRAs and 401(k)s in the stock market with the hope of seeing a recovery.
Ruth Rambo, a 62-year-old associate state director for AARP, said she lost $50,000 to $60,000 from her 401(k), primarily in the past six months.
"Worried is not the right word," she said. "Try petrified. I have three years before I retire, and I'm taking the vow of poverty now because I won't have the disposable income I was planning on."
Ms. Rambo, who plans to retire from her Montgomery, Ala., home to James Island, S.C., said her main goal is to make up losses by moving her pension fund and Social Security income to cover her 401(k).
Stocks have taken on much more importance as a percentage of families' financial assets, almost doubling from 27.8 percent of financial assets in 1989 to 53.9 percent in 1998.
"The average American has a sick spot deep in their stomach over this," said Jim Koch, director of the Center for Science, Technology and Society at Santa Clara University in California.
There has not been a significant dampening of consumer spending, which accounts for two-thirds of economic growth, but the fallout during the market downturn remains to be seen.
"We haven't fully digested the reverse wealth effect and its potential impact on consumer psychology," Mr. Koch said.
David Machamer wasn't sure he was making the right decision when he recently invested in mutual funds at VanGuard Group Inc.
The 45-year-old Oklahoma City resident said he is now certain he made "the wrong move, especially with how the [stock] market has been heading."
However, Mr. Machamer said that he, like most investors, is in the market for the long term at least 10 to 15 years with his mutual funds and 401(k) retirement plan.
"I'm not in it to earn a bunch of money in a relatively short period of time like those investors who are in front of a computer 24 hours a day," he said.
Stories of losses in lifelong investments have made younger and middle-aged investors, such as Jim Hazam, glad to be far from retirement.
"If I was going to retire, I'd be really worried," said Mr. Hazam of Gainesville, Va. Although he plans to keep his money invested in mutual funds, IRAs and his 401(k), Mr. Hazam echoed concerns of many individual investors who insist corporate executives should be more responsible with other people's money.
"Big companies need to look at their executives and their compensation packages, because who's suffering is the personal investor."
For recent Villanova University graduate Carolyn Doyle, the market's downturn is a "huge concern," but she's glad to be young. Miss Doyle of Norwich, Conn., said she lost $10,000 of her college fund last year but would still invest, after careful research, if she had the money.
Not all investors are upset about the market's instability.
Maureen Wilmot, a Santa Cruz, Calif., resident who works for ocean conservation, said she isn't worried as she has 15 years before planning to use her investments in some stocks and her 401(k).
"I'm personally hoping the stock market will crash," Mrs. Wilmot said. "That way, it'll be more affordable for me to buy a house."
D.C. resident Rob Black also said he isn't worrying.
"It's a little disturbing how much it's gone down, but it doesn't bother me because it's going to come back," he said.
The 23-year-old Treasury Department employee said he has had money invested for 15 years, with his parents investing for him when he was a child and him investing as a teen-ager.
"I've always invested for the long-term," Mr. Black said. "You're going to eventually see growth in the market."
Mr. Black, who has all his savings in stocks, said he has focused on investing for the future and isn't worried because he isn't planning on buying a home or starting a family anytime soon.
But many shaken investors are putting their money into property.
The National Association of Realtors reported that sales of existing homes in May were running at an annual rate of 5.75 million, the fourth-highest monthly level on record.
According to Merrill Lynch, between Jan. 1 and last week, investors put an additional $2.7 billion into real estate investment trusts, or REITS, which are companies that invest in real estate holdings. The figure is a huge leap from the $34 million for all of last year.
Although investors say the stock market will bounce back, they acknowledge that it will take some kind of rebuilding in consumer confidence. That trust took a beating after a barrage of corporate accounting scandals, involving companies such as Enron Corp. and WorldCom, which filed for bankruptcy on Sunday.
"It's going to take a long time to restore trust," Miss Doyle said.
This article is based in part on wire service reports.

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