By Daniel Trotta

NEW YORK (Reuters) - Turmoil on Wall Street is pushing financial professionals to the therapist's couch, cutting into retirement funds and testing the mettle of small investors caught in the vortex.

With investment bank JPMorgan Chase & Co agreeing to buy stricken rival Bear Stearns and the U.S. Federal Reserve stepping in to prop up securities firms and cutting interest rates another 75 basis points on Tuesday, everyday Americans are feeling the squeeze.

The state of the economy is now the major issue in the campaign for the U.S. presidential election in November and various polls show consumers are turning gloomy and believe the economy is in recession.

The Fed slashed benchmark overnight rates by three-quarters of a percentage point to 2.25 percent on Tuesday, making for a combined cut of 3.0 percentage points since mid-September in a bid to revitalize the economy.

The rate cuts diminish returns for older people who have shifted their retirement portfolios to safer investments like government bonds and money market accounts.

Judy Bridges, 68, a writing teacher in Wisconsin, said the retirement fund for her 91-year-old aunt living in a $6,000-a-month (2,989 pound-a-month) nursing home is about to run out.

"As the interest income on her investments retracts, we get nearer and nearer to the day where she will have to go on (state aid). ... We'll need to pick up the tab," Bridges said. "I'm glad she doesn't know what is happening to the money she worked so hard to save."

People are voicing concerns as they see businesses slump, friends laid off and ballooning mortgage obligations surpassing the value of their homes.