Today, after listening to the President speak, I started thinking about the economy’s impact on older Americans. I found an interesting report from The National Academies Press titled:  Assessing the Impact of Severe Economic Recession on the Elderly. You can read the document here, which summarizes a workshop called by The National Institute on Aging. The report’s main goal is to reflect on what we already know and what we need to learn about the current recession’s effect on older adults. Unfortunately, what we already know is quite bleak.

How People are Coping: All age groups are being affected by the recession but older workers are often unable to completely recover from these kinds of financial shocks. The most common ways people are coping with income loss are to reduce spending, reduce saving, utilize unemployment benefits, withdraw money from savings, get financial assistance from friends or family, and borrow money (i.e. credit cards, loans). Some older workers are also choosing to delay retirement as an additional coping method.

Our Health and Well-Being: Our health is being negatively effected by the economic recession. GDP is strongly, inversely related to mortality over the long term, and older workers who lose their jobs are at greater risk for certain health conditions than those who remain employed. Still the Gallup Well-Being Index found that people’s well-being significantly declined in the fall of 2008 but went back up substantially by May 2009. I am nervous, now that we lost our AAA rating and the current stock market is in turmoil, if people’s well-being will again decline.

Unemployment or Retirement: Unfortunately, older adults who lose their job are less likely to get hired back into the labor force compared to younger workers. Those who do find work are often making significantly less than they made at their previous job. Researchers find that age discrimination in the workplace continues to exist, particularly for older women. It is therefore not surprising that many older adults who lost their jobs are deciding to retire. This early retirement, however, could hurt future finances. Increases in Social Security’s full retirement age, less time to invest in your retirement accounts, fewer vested years with your employer, or simply having less in wages over your lifetime can all have negative effects on your finances in old age.

What Can You Do: The report summarizes a depressing situation and then has limited suggestions (and most of them seem pretty intuitive to me). I don’t know if it will tell you anything new but here they are along with my own comments:

  • Buy low, sell high – Experts suggest raising your contribution rates (if you can) to your stocks, bonds and pension accounts while the market is doing poorly. If the markets bounce back before you retire you may gain substantially (the younger you are the more you are likely to gain). If you are retired and have spare cash, consider moving it into low-risk funds so that you too may gain from the markets being low (Please consult a financial adviser who will learn about your personal situation. Do not take this as professional advice).
  • Reduce your spending – A no-brainer but often hard to do. Consider what you really need now and what can wait. Did you know that “I don’t need it” is the most common reason eligible individuals refuse welfare? Figure out what you really need, what you can live without, and what is most important to you.
  • Stay in your home – Selling now is not a great idea, so consider modifications if your home is currently not a safe place to grow old.
  • Keep your job – If possible, consider waiting to retire. If you have been laid off, consider looking for new employment and working a few more years before you retire. Collecting your Social Security benefits early will mean a lower monthly paycheck for the rest of your life.
  • Utilize family – Your family may be able to provide some insurance against financial shocks. It’s important to have someone you can call on for help, even if you don’t use them.
The report highlights a ton of questions we need to research before we can understand what is going on. Unfortunately all that means is the recession’s impact on older workers will be understood after it’s all over, providing them little support in the meantime.
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