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Path to retirement fraught with hurdles after downturn; Many struggle to recoup losses in stock market

Since the downturn began three years ago, the path to retirement for older workers has become an ever-lengthening obstacle course, and last week's market turmoil may have made it even longer.

"I'm taking a pounding," said 67-year-old Bill Alston of San Jose, an engineer between jobs, on watching the stock market's convulsions. "Where do you put your money? What is a dollar going to be worth? We're really on shaky ground."

Many older workers are responding to the economic downturn by postponing retirement, but even so, it will be a struggle to make up for market losses in their retirement plans. Some were counting on their houses as a post-work financial cushion, but now their homes are worth less. They can't depend on dividends and interest on savings -- that income has nearly vanished. They also face layoffs and difficulties getting rehired.

Take Alston. He's looking for a full-time job. He has an impressive resume and a string of patents but has had trouble landing work. He has also had to dip into his retirement savings to make ends meet, even as the market has taken its own bite.

"Those words like 'overqualified' are all smoke screens for 'old,' " said Alston of the comment he's heard too often from prospective employers.

Numbers compiled by AARP from various sources and its own survey of 5,000 Americans tell the story of being over 50 in 2011.

Older Americans are working longer. In 1985, about 18 percent of people ages 65 to 69 were either working or looking for a job. In 2010, that number has grown to about 31 percent.

Their homes are worth less. Nearly a third of people AARP polled said their homes declined substantially in value.

They have a lower unemployment rate, but when they lose a job, it's hard to land a new one. At the beginning of the recession, 23 percent of unemployed people age 55 and older were out of work for more than 27 weeks; last month it was 54 percent.

Jane Cooley, 55, who lives in Pleasanton, Calif., was with Sun Microsystems for 13 years, but her job vanished when the company was sold to Oracle in 2009. While job seeking, she has been a volunteer teacher in solar thermal technology at Diablo Valley College in Pleasant Hill, Calif.

When the stock market began to look shaky, Cooley sold half the mutual funds in her 401(k) and parked the proceeds in a money-market fund. The other half was down 20 percent at the depths of Wall Street's recent sell-off. The economy is "scary" for those age 45 or older, she said.

Adding insult to injury, the pensions older Americans could once depend on have been replaced by defined contribution plans -- 401(k)s that bob up and down like flotsam on the tidal waves of the stock market.

A recent study by the Employee Retirement Benefit Institute found that for many Americans, the best way to fund retirement was to delay it. Among the lowest income group, 90 percent would have to keep working through age 84 before having a 50-50 shot at fully funding retirement, the institute found. The prospects are better for the other 75 percent, but most experts advise those who have jobs that pay well to work another two to three years.

Sara Rix, policy adviser at AARP, notes that delaying retirement a few years gives a person that much longer to have an income and health plan, contribute to a retirement plan and put off taking Social Security -- which could increase those monthly checks.

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