The downturn in stock markets, including yesterday's 508-point plunge in the Dow Jones industrial average, may have some Hawai'i residents delaying retirement because their 401(k) and IRA accounts have sunk in value.

People across the country are contemplating putting in more time at their jobs because they don't think they can afford to retire now.

"It was a wake-up call for people," said Martin Arinaga, a certified financial planner and co-founder of Chinen & Arinaga Financial Group Inc.

"Some people, I imagine, are going to end up working longer."

People nearing retirement and retirees who still hold stocks are thought to be among the most vulnerable financially to recent stock market declines. While younger people have more time on their side for the markets to rebound, the downturn may be more of a concern to people just a handful of years away from retirement, or those who had a portion of their nest egg tied up in stocks.

So far this year, the Standard & Poor's index of 500 stocks has fallen 32 percent, with yesterday's decline sinking it below 1,000 for the first time since 2003. The Dow on Monday slid below 10,000. It is down almost 29 percent since the end of last year as worries about the credit crunch and the U.S. economy hit investor confidence.

Yesterday, Peter Orszag, head of the Congressional Budget Office, told the House Education and Labor Committee that Americans' retirement plans have lost as much as $2 trillion in the past 15 months.

He said turmoil in financial markets is also devastating people's savings, forcing families to hold off on major purchases and delay retirements. That's being felt in Honolulu.

"We do know there's a level of anxiety that the community, certainly among our members and most certainly among people who are either in retirement and have fixed incomes or nearing retirement, and (who) have carefully laid plans that may or may not look as good as they did a couple of weeks ago," said Bruce Bottorff, associate director of AARP Hawaii.

A national study released this month by AARP shows that more than six in 10 workers 45 or older say they will delay retirement and work longer if the economy does not improve significantly. The survey found that a similar percentage said they will spend less when they retire.

NO TIME TO PANIC

It's not known what percentage of Hawai'i's population is having problems because their stock portfolios have declined. But financial planners report receiving more calls from clients, including those who want to know what to do about their stock investments.

"I think for a lot of people, there's a panic that sets in and they want to take money out," said Tim C. Lee, a certified financial planner with First Financial Planners in Honolulu.

Lee has advised against panicked selling, because people lock in their losses if they sell and aren't in position to reap benefits of an upturn in stock markets when a recovery starts.

But he said most of his clients are well diversified and should be able to withstand the downturn. Most financial advisers recommend clients switch into more conservative investments such as bonds and other income-producing securities as they near retirement.

Besides these, Lee also looks at annuities for his clients nearing retirement and may suggest some stocks to help keep up with inflation.

"Those that have limited means and can't stand any loss where money is locked up due to a market downturn, they really should not be overexposed in equities at all," he said.

"The key is the old adage of diversification."

The same practice of tailoring retirement packages for each client is applied by Arinaga, who said people who are retired or nearing retirement should at the very least call their advisers and review their accounts. He said calls to his office from worried clients began earlier this year, and that his own practice is to sift facts from emotions.

This includes recalling 1987, 1990 and 2003, when markets looked bleak, and explaining that the market later came back strong. He also notes that people generally have three options: to get out of the market, sit tight or buy more.

He generally doesn't recommend the first option and notes the third, buying blue-chip stocks at current prices, may be worthwhile for some people. At the same time, sitting tight may apply to folks who are worried they may have to work longer to retirement.

"If you pull out of the market, then the next question is when are you going to get back in, and what's your signal?"

Arinaga said his clients are generally well diversified but that he still expects more calls in coming weeks as statements from the end of September are mailed out and people see how much their stock holdings have declined.

To be sure, there are many people nearing retirement, or who are retired, who may be anxious about the downturn but will do OK because they have payments from a pension plan and don't rely heavily on their own stock investments.

The state Employees' Retirement System reported no increase in state or county workers rescinding their applications for retirement.