The news that retirement accounts have lost $2 trillion in value in little more than a year was a sobering reminder of the severity of the ongoing financial crisis. Although the huge losses are on paper for now, they highlight the difficult choices for not only those hoping to soon retire, but for all expecting their retirement accounts to see them through their golden years.

Because of the stock market slide, retirement accounts – both pensions and the more prevalent 401(k)s – have lost 20 percent of their total value in the past 15 months.

As a result, workers have three basic choices, Congress’ top budget analyst told the House Committee on Education and Labor this week. They can spend less now, plan to spend less in retirement or they can delay retirement, said Peter Orszag.

This sobering advice is a stark contrast to President Bush’s advice to go shopping to boost the economy in the wake of the Sept. 11 terrorist attacks. It is also more realistic.

For the majority of Americans, a retirement account is their only savings – and even then it is outweighed by their debt. In 2005, the country’s collective savings rate dropped into negative territory for the first time since the Great Depression. Like the U.S. government, consumers are spending and borrowing more than they make.

According to the Federal Reserve, Americans owe more than $2.5 trillion in consumer debt, a nearly 25 percent increase in the last five years. The average amount of credit card debt is over $10,000 per household, a 25 percent increase since 2000.

Now, retirement savings accounts, many of which were too small to begin with, have shrunk dramatically. Both pensions, in which the employer is responsible for providing a set amount of money to retired employees, and 401(k) accounts, in which employees set aside a portion of their paycheck for retirement, often with a contribution from the employers, have been hit by the stock market drop.

Making up 401(k) losses – largely through hoping the market rebounds and investments regain value – falls to individual employees. Pension losses are often also borne by workers and, in the case of public employee pensions, also taxpayers. Because pension obligations must be met, companies may delay salary increases or reduce benefits or raise prices to do so. Cities and states may have to raise taxes or cut programs to meet pension obligations.

Mr. Orszag’s three choices boil down to a change in expectations. It is advice worth following even when the economy improves.