A Kinder, Gentler Recession for Seniors?

Is the Great Recession bypassing seniors? That's the conclusion drawn by a new study looking at the downturn's impact on different age groups. But I'm not buying it.

The Pew Research Center poll reports that Americans over age 65 are less likely to have been forced to cut their spending by the downturn than middle-aged people. Fewer seniors report sharp declines in retirement portfolios than other age groups and are more likely to express overall satisfaction with their financial situations.

I can't argue with the Pew reports, since the findings simply reflect what people are telling pollsters. But polls only answer the questions that you ask. In this case, the questions generated headlines claiming the recession has been "kinder and gentler" for seniors--and that misses a bigger emerging picture that's much less positive.

No doubt, people on the cusp of retirement are in bad shape. Pew notes that Americans age 50-64 are near their peak earning power and net worth, and will need to tap their retirement funds soon--in many cases, before the market fully bounces back. The poll shows this group has been most likely to lose money in stocks or retirement accounts, and has suffered big losses. They're also the most likely to say they won't have sufficient funds to live on in retirement; nearly half of those who are still working say they're considering delaying retirement.

Meanwhile young adults are least likely to say they've been crushed by the stock market, mainly since they don't have as much money invested. About 70 percent of 18-29 year- olds report that they haven't lost money on investments, and 45 percent of 30-49-year-olds say the same. But they're four times more likely than older people to say they have had trouble securing affordable medical care. And they're far more likely to have experienced a job layoff.

Still--a recession that has been "kinder and gentler" to people over 65? Dig into Pew's data and a more complex picture emerges. Yes, Americans over 65 were least likely to lose money in the market; that's because some have pulled their money out of stocks as they entered the de-cumulation phase of their financial lives. But beyond the markets, even Pew's own data shows:

• More than a third of seniors have cut their household spending in the past year.

• Nearly 40 percent say the recession has caused stress in their families.

• A majority (56 percent) say the recession "probably will make it harder for them to take care of their financial needs in retirement."

And that's just the information contained in the poll. Widen the lens a bit beyond Pew's questions and other troubling indicators come into view.

Even with Medicare and Medicaid, the health care security net for older Americans is fraying. Out-of-pocket retiree health costs have jumped 50 percent since 2002, mainly reflecting higher Medicare premiums, over-the-counter medications, dental care and long-term care expenses. Meanwhile, millions of retirees are losing employer-paid health benefits as corporations retrench (see: bankrupt Detroit automakers).

Many experts believe pension funds will be the next shoe to drop. Defined benefit pensions provide income to about 23 percent of seniors; the recession has increased the risk that more plans will be terminated due to business failures. When that happens to private sector employers, the Pension Benefit Guarantee Corporation (PBGC) usually takes over the plan liabilities, but pension recipients almost always take a haircut on benefits. How serious is the trend? Over the past six months, the PBGC's deficit from guaranteeing pensions tripled to $33.5 billion, a record high.

The picture is just as gruesome--and perhaps worse--for public pension plans sponsored by many state and local governments; for years, sponsors have starved these plans for cash and now face multi-billion dollar holes.

Then there's the frozen market for real estate--the most important financial asset for most seniors after Social Security. Many have built up substantial equity in their homes that they expected to tap in retirement; others will just want to sell and move to retirement housing.

In many parts of the country, the current market has made it very difficult for seniors to sell when the time comes to move for health or lifestyle reasons. Reverse mortgages offer a solution for extracting equity in some cases, although the fees on these loans can be prohibitively high.

A "kinder and gentler" recession for seniors? Maybe, compared with other age groups--but it's certainly no picnic.

Comments

[PhillyQuaker]

health care security net for older Americans is fraying.
Yes, as long as obtaining affordable health insurance is tied to having a job! Guess what - if you are over 50, you have a snowball's chance in Hades of finding a new job. Age discrimination is rampant.

[Kungfublood]

Just imagine what it would be like if the Republicans had got their paws on Social Security like they wanted.

[robinhood1]

I wonder how many seniors at the financial margin voted for GW, twice? What were they thinking? Did really get that much of a tax cut? Did they really vote for him because he supported a Federal marriage Amendment? Now the butcher's bills are coming due and very few of us will escape the pain. Obama can't work miracles so don't expect him to.

[marysandra]

I think that some seniors are in for a big shock when their pension funds go belly up. But inflation has caught up with everyone,even those golf course living folks quoted in an earlier post. However, most of the elder generation does remember, if dimly, how to "suck it up" and get by on less, even much less. Yes, they worked through some prosperous times, but have been through some tough ones too.It is harder on the young families, for sure. One overlooked factor is that many seniors will not be able to bail out their adult children and help out their grandchildren as many have done for a long time.

[mamacat]

Yes, exactly.

We too have helped our adult children. Even though they have tried to be financially responsible, they did not plan for this financial meltdown. I do not know how long we will be in the position to help them when they need it, other than to offer them a place with a roof over their heads.

As for the pension funds, I got a letter a few weeks ago telling me that my pension is in danger of going belly-up, and that if the federal government takes over its responsiblilities, we will get only about 75% of what we are getting now. So, we won't starve, but we may end up with less than we thought we would get. We grew up without the habits of living on our credit cards and on home equity loans, so we do not have any debt. That helps a lot.

As for the stock market, we did not put most of our retirement funds into it directly (although my pension relies on investments in the stock market). So, while our stocks took a dive, it was more interesting than threatening. We kept most of our cash in CDs, and by putting some into the stock market when it was bottoming out, we have made up what we lost in the initial fall. Now the question is, will the market go tank again?

[Kassandra]

Oh, haven't you heard? The government sez there IS no inflation and therefore, no need for "cost of living" increase for folks living on Social Security for at least the next two years!

I guess our elected elites don't go shopping...........

[ratface]

Who says we are not hurting..........when you have a broker who tells you, don't worry about Wachovia, it is the 4th largest bank in the Country...............$150,000 down the drain.........MF...stay the course, he says, they will come back.........WHEN, I am already 76...........FIRED THAT FOOL, but only after he lost us $350,000. Now we live on less, much less........new broker gets us into bonds, less stock, we lost a bundle, but she got us income again, he would have sat back and watched it all disappear and say.........well, who would have known???????? Too many brokers are not well trained to keep their clients in the right investments for their stage of life.......GET THE HELL OUT OF THE MARKET, IT IS NOTHING BUT MANIPULATION BY THE HEDGEFUNDERS & BIG BROKERS.....THEY WANT EVERYBODY'S MONEY, DOWN TO THE PENNY !!!!!!!!!!!

[steppenwolfsayshi]

What a joke. People that are retired today worked during the most prosperous times in this country. They expect benefits that workers today can only dream about. But don't worry the AARP will ensure that people over 65 will keep their enourmously disportionate share of this nation's wealth, so that they can spend it on houses on golf courses in Florida while young workers can't afford medical care and 1in 4 children in the South suffers from chronic hunger.

[FaaLaveLave]

Did anyone consider those of us living on interest from our savings? Money that we were able to invest at over 5% when it was last invested is about to be reinvested at 1.75%. Nothing kind about that.

What these people, anxious to see this "recession" over and making their rosy predictions, do not seem to understand is that there will not be any improvement in the spending any time soon. The "downturn" is headed down a steep hill for the foreseeable future. With the Fed voicing the opinion that the best return on savings (interest rate) needs to be -5% we seniors are looking at starvation.

This is what we worked our lives for? Worked and saved......tried to do everything "responsible" to care for ourselves in retirement? Little did we expect our money to be spilled out by the billions to those theives who tore the country's economy apart.

[tompoe]

What's "kinder gentler" about rising gas, heating, food, insurance bills? When's the last time Miller paid less than $10 for a coffee shop breakfast?

[robinhood1]

You could always eat at home and for a lot less.

[chrisro]

In my view, seniors have a rough road ahead of them...and the main reason is inflation.

If you're on a fixed income, you can't possibly keep up with rising prices. As prices continue to escalate, seniors have a much harder time.

When "sound money" becomes the main issue (and eventually it will)...expect to see seniors backing the voices who are championing the cause.

[mamacat]

The financial news has been that we have recently been in a period of deflation, not inflation, a sure sign that we are in a depression. When the economy is clearly on the road to recovery, it will be necessary to cut back on government spending appropriately. That is, to cut back spending, but not so much as to undermine any recovery.

At this moment in time, the most imortant thing to do in regards to the economy is to keep as many people as possible out of poverty.