After more than three decades as a building contractor in the Seattle area, Scott Sengstock thought he had a pretty clear timeline for retirement.
“Five more years would have been the plan,” said the 59-year-old Normandy Park resident as he parked his truck near a work site in North Seattle on Friday morning. But over the last few weeks, economic uncertainty sparked by the novel coronavirus has decimated his retirement account.
“There’s a big hole in that now,” said Sengstock, who figures he has lost roughly $200,000 since mid-February. “It gives you anxiety every day.”
Sengstock could be speaking for many of the hundreds of thousands of people in the Seattle area who have seen their own financial futures rewritten by the coronavirus.
Since Feb. 12, share prices on the major stock indexes have lost around a fifth of their value, even after rebounding Friday. Those losses, among the worst of the last half century, have created huge uncertainties for the roughly 50% of Americans who own stocks, bonds and other financial assets.
The plunge in stocks can be largely academic for young people with time to wait for the market to recover — and irrelevant for the many people who don’t own investment portfolios. But for those, like Sengstock, who have socked away money in the stock market — and who are now at or approaching the age when they’ll need those funds to live on, the market’s sharp decline has been unnerving.
“They have reason to be anxious,” said Thomas Gilbert, an associate professor of finance and business economics at University of Washington’s Foster School of Business, describing retirees or people within five years of retirement. “It could take one to two years before the market is fully back to where it was a few weeks ago.”
Anxiety over the recent volatility in stocks comes on top of a new set of fears over COVID-19, the illness caused by the coronavirus. It is particularly dangerous for residents nearing retirement age.
The fallout from the fast-spreading outbreak has already led to layoffs and business closures in the Seattle area. That means workers approaching retirement could also be facing other economic challenges.
Sengstock recalled that during the downturn after the September 11 terrorist attacks in 2001, many housing projects ground to a halt.
“The market just dunked,” he said. “We had all sorts of jobs lined up and when those people’s portfolios crashed, they didn’t do the jobs. They said, ‘We’re not going to spend that money.'”
That’s still a risk this time around, he said: “There’s no guarantees when you work for yourself.”
Plunging stocks pose another risk for older workers in a region like Seattle, where many of the biggest employers use company shares as part of their compensation. Often, these workers “overweight” their retirement portfolios with shares from their own companies, said Stephan Siegel, a professor of finance and business economics at UW’s Foster School.
That’s because most nonprofessional investors tend to be “biased toward things they’re familiar with,” Siegel said. But it tends to be a high-risk strategy, since it means that both their current income and their retirement savings are tied to a single company, “which typically isn’t a good thing,” Siegel said.
That risk was probably on the minds of workers at Redmond-based Microsoft and Seattle-based Amazon, where stock prices over the last 30 days fell 24% and 22%, respectively, before recovering slightly on Friday.
Boeing’s stock has fared much worse. In the last 30 days, it has fallen 50%, closing Friday at $170.20.
“Given time, maybe three or four years, we might be back up to the $300 range,” said a Boeing engineer in his early 60s who asked not to be identified and is trying to decide if he should change his stock portfolio. “But no one knows how long the market will stay depressed.”
For workers in that situation, or for retirees who face a shortfall in their retirement funds, there may be “some tough decisions to be made,” said the University of Washington’s Gilbert. They could include delaying retirement or putting off planned expenditures for those still working, or, for retirees, taking out a loan.
“There’s no magic bullet,” Gilbert added. “If you need liquidity within six months, there’s not a whole lot of choices.”
Some residents tried to keep the market turmoil in perspective. Their experiences during earlier market crashes had taught them how painful a downturn can be, but also how temporary that pain can be. Many of them also thought that the market was overvalued before the current crash. According to Siegel, the price-to-earnings ratio of the average stock, a standard measure of the market’s value, was nearly twice the long-term average.
“It was due for a correction,” said Paul Roy, 58, a Microsoft employee.
Charlie Grieser, 70, who retired from Boeing in 2016, remembered watching Boeing’s stock plummet during the turmoil that followed “Black Monday” — October 19, 1987. But on the advice of a co-worker who’d been through earlier downturns, Grieser took advantage of low stock prices to invest in more Boeing stock. Nearly 30 years later, that allowed him and his wife “to retire with a smile.”
His advice to fellow retirees and soon-to-be retirees? If you have any appetite for risk, consider buying stock in companies that were doing well before the outbreak.
“This is a good time to buy Boeing,” he said. And even if you don’t, Grieser said, leave your 401(k) alone, “because this is going to pass.”
It’s not just retirees such as Grieser who have taken that long-term view. Zach Lubarsky, a 28-year-old engineer at the Seattle offices of Groupon, said he and his peers were less concerned about their stock holdings than they were about the coronavirus outbreak.
“Frankly, people are more worried about getting sick or whether they can go places,” said Lubarsky. His shares in Groupon and in Microsoft, where he also worked, will take care of themselves, he said.
Scott Cooper, owner of Blue Highway Games in the Queen Anne neighborhood, has a similar outlook. With business at the shop down by as much as 50% on some days since the outbreak, the 52-year-old hasn’t checked his stock portfolio.
“I’m much more focused on the immediate emergency,” Cooper said. He added that he plans to keep ignoring the stock market until he needs to tap into his retirement funds “10 years from now, when, hopefully, things will have rebounded.”
This story has been updated with the correct percentage for the decline in stock prices since Feb. 12.