Why the very old face a financial doomsday
People older than 75 are in crisis, struggling with rising debt and falling returns on fixed assets.
So much for the golden years.
People over 75 are increasingly in financial crisis, incurring mounting credit card debt while dealing with low interest rates that crush returns on their nest eggs. As Michael Hiltzik in the Los Angeles Times notes, "The facts are sobering."
Americans over 75 lost almost one-third of their financial assets from 2007 to 2010, according to a study from AARP Public Policy Institute. On top of that, the group is adding on debt. Nearly 22% of people 75 and older carry credit card debt, a rise from 18.8% in 2007.
Part of the problem plaguing seniors is the current financial environment marked by low interest rates, which have diminished the returns for retirees who placed their assets in fixed-rate instruments.
As a result, the 4% rule may no longer hold valid for retirees. That guideline, developed in the 1990s, says if retirees withdraw about 4.5% of their savings every year, their retirement assets should span three decades.
But that rule was developed when portfolios earned about 8%, about double today's returns, The New York Times pointed out in a recent article.
On top of that, retirees get a double whammy if Social Security benefits are tweaked to link them to the chained CPI, a version of the consumer price index. Supported by both President Barack Obama and conservatives, the chained CPI grows more slowly than the current inflation metric. Critics say the effect will be a stealth tax on seniors.
While some retirees have built solid nest eggs, the truth is that almost half of senior citizens die nearly broke, according to a study last year from James Poterba of MIT, Steven Venti of Dartmouth College and David A. Wise of Harvard University. Their research found that 46% of seniors die with less than $10,000 in assets, indicating they're unlikely to withstand financial emergencies.
What are some options for the very old? The L.A. Times' Hiltzik noted how few choices there are, but one would be to "enhance Social Security benefits for older retirees." Another idea is for older seniors to invest in an advanced-life deferred annuity, offered by companies such as MetLife (MET). The investments start paying out only once the investor reaches, yes, an advanced age. That would help guarantee financial security for the very old.
As AARP expert Debra Whitman told Hiltzik, "The oldest old are suffering a great deal now."
Follow Aimee Picchi on Twitter at @aimeepicchi.
1) the elderly should have prepared themselves better for retirement?
2) the elderly should be turned into mulch, since they are taking too many entitlements?
3) the elderly should have to work until they are dead, to stave off Alzheimer's ?
Come on, Neo-cons....where's the team spirit?
Or is Matthew 25:40 just a bunch of hogwash when it comes to action?
:"And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me."
Without the elderly WE would NOT even be here. Cherish that anterior 'platform' !
If I had listened to my financial advisors back in 2000 I'd be in the same boat. I started in vesting in 1991 with a $15,000 nest egg. By 2000 I had reached $41,000. I was advised to put all my investments in bonds so I wouldn't lose any money. My wife and I both retired in 2000 but were lured back to work in in 6 months. We saved and invested 90 percent of our SS checks until we retired for good in 2009. By then we had $200,000. We are now 40 percent high dividend, low volatility stocks and 55 percent bond funds and 5 percent cash. We can draw $3000 a month for the rest of our lives.
..."almost ,..." If it is planned right what is wrong with that?? when you die, you cant take it with you. While it is nice to have a cushion for a refrig or stove or other repairs or even a gift to your children - you earned it you should be able to spend it - you saved/invested the money to see you through retirement. I know many seniors are not enjoying the "golden years" due to health, inflation, prices but are getting by on their own power which is a "value" that has no price tag.
The real issue is the generation coming behind them - many financial articles over teh past year or so are saying that to retire you need ot have 1.5 mill - even the common upper educated wage earner isnt going have investments or retirement funds that will reach that goal in these unsettled markets. And just think we have only started the inflation period that our kids and grandkids will have to deal with along with trying to pay off the (intra)national debt. Doesnt that just make you wish you had those worthless green backs to stuff the materuss with???
when , about double today's returns
Double? Show me where a senior can get a short term, guaranteed rate of 4%!
I hat to sound callous but a lot of seniors voted to Obama! I said this 4 years ago, Obama talks a good game of "fair" Obama talks about helping the poor, Retired and middle class and yet Obama has hurt all of them and the worst is yet to come!
Social security is going broke and Obama gives a SS holiday ? Obama fix's interest rates at near 0-1/2 % for the banks who only pay 1 % interest on money held in accounts! This interest is what a lot of seniors live on!
prices are increasing because Obama is printing trillions of dollars every year thus devaluing the value of the US dollar! This means it takes more money to buy things because the dollar is worth less and less every month since Obama took office!
Obama has passed so many anti business regulations and then wonders why business are not expanding or hiring!
Obama care that could cost employers up to 6000 per year per employee if they work over 30 hours per week. Just try to find a Full time 40 hour week low skill job now! Obama new rules for counting the unemployed , counts you as employed no matter how many or little hours you work! Just more BS for Obama.
Things are great Obama says but more people are on government assistance than EVER!
Wake up American, Obama is not your friend! Seniors if you continue voting for a socialist progressive democrat you deserve to be broke!! Remember you gave him the power for hope and change and that is all we are being left with , Some Change!! and no hope except for mid term elections to start turning things around!!
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