4/26/2012 5:33 PM ET|
Financial exhaustion hitting seniors
The easy cuts have been made, and many retirees find themselves with flat incomes, shrunken nest eggs and lower home values than they had expected.
On paper, consumer price inflation has been tame, personal incomes are modestly higher, and measures of senior poverty are reassuringly low. But in the real world, prices for many consumer items are much higher, especially in poorer neighborhoods without Wal-Marts and other price-conscious retailers. Incomes for many seniors are not rising. And many older households are experiencing what can best be called financial exhaustion.
Many older consumers have scrimped during their retirement years to make ends meet. While they make enough money to avoid poverty, they don't have much of a cushion. Now, with nest eggs depleted and home values still depressed, they are running out of painless financial sacrifices.
ClearPoint Credit Counseling Solutions operates all over the United States and is one of the nation's largest nonprofit counseling agencies. Based on summaries of its counseling workload, rising numbers of seniors are running out of money, and the trend is getting worse.
In 2007, less than 5% of the consumers using ClearPoint's credit counseling services were at least 65 years old. At the beginning of this year, the organization reports, more than 13% of its clients were seniors.
Further, ClearPoint says, the dominant reason seniors sought counseling in 2007 was to get help with their poor money management and excessive spending. Today, however, the top problem bringing them in for counseling is reduced income.
If the economic recovery is moving ahead, it's doing so very slowly for many older consumers. "Things are starting to get better, but they're not getting there very fast," says Patrick Owens, a ClearPoint counselor in Richmond, Va. "Right now, we seem to see the same situations (with seniors) with rising credit card debts and falling values of their homes.
"They're taking on more unsecured debt," Owens explains. "They know they don't want to rely on their credit cards" but don't see an alternative. "Many of them are not aware of other forms of assistance" that credit counseling agencies can help provide, including help paying utility and medical bills.
Cynthia Hampton is a ClearPoint counselor in Memphis who sees consumers from Tennessee and nearby parts of Mississippi and Arkansas. "What we're seeing is a substantial increase, from the past five to eight years, of seniors having more debt for a variety of reasons," she says.
"It's getting worse, because the cost of living is increasing but the income of seniors is not keeping up," Hampton says. "The middle-income person has just about disappeared, and most of our seniors were in that middle-income bracket."
People often use their recurring Social Security payments and any pension income to pay their fixed bills, she explains. Unable to cover their variable expenses, older people are increasingly putting their food and medical expenses on their credit cards.
"We are seeing people who even have (Medicare)" with a 20% co-pay requirement, Hampton says. "They are not able to pay the 20% for a hospital stay or a series of doctors' bills for a serious illness. . . . So it's often a choice of either food or medicine."
Ironically, living costs in low-income urban neighborhoods can be higher than in the higher-income suburbs. "Some of our clients do not want or are unable to leave their community to shop in one of the big, lower-priced stores," Hampton says.
Loneliness and isolation can also take a financial toll on seniors, particularly widows. "They're lonely, but they're afraid to go out because of the high crime rate," she says. "So they amuse themselves with the television remote control" and buy things they can't afford and may not need from the shopping channels.
Hampton and Owens stressed that seniors should be aware that ClearPoint and other accredited nonprofit counseling agencies can help consumers in several ways, including:
- Negotiating lower monthly payments and interest rates with credit card companies. This often can include forgiveness of late fees and other non-purchase charges.
- Interceding with collection agencies to help take the heat off of people in debt. Typically, the money still needs to be repaid, but the time pressure can be reduced.
- Working with credit bureaus to remove black marks from a person's credit history.
- Developing repayment plans with doctors, hospitals and other medical providers.
- Finding payment plans or subsidies from major utilities.
- Providing housing counseling for people behind on their payments.
- Working with consumers to build personal budgets and new spending plans that are in balance with their incomes.
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VIDEO ON MSN MONEY
I was suppose to retire in 1997. I moved to a warmer climate were things were less expensive.
15 years passed and every thing is upside down.
I bought a home on the the water for $140,000.00, taxes were $1400. AND INSURANCE WAS $800.00. WATER $39.00 and
electric $60.00. This property went to over $500,000 and now worth less than i Paid for it.
Next week the insurance company is coming to inspect my home to try to jack up my policy to $3000.00 from $2300.00
Taxes are now 2600., water over 110. and electric 135. Food that cost $120..00 per month now is $300-400 every month at walmat. Plus weekly visits to replenish out of stock about 75.00. Gas for cars is $4.19 a gallion and going up.
I sold all investments over last 10 years, property, gold, Diamonds. and Junk laying around. the stock market wiped out my stocks and lowered my annuities. My Health insurance is almost $ 9000.00 per Year. Income is down $20,0000.00 from last year. I think I am carrying 2000 monkeys on my back. I need to get a job to add some more monkeys to carry.
The governent is in charge of maintaining the ecomoney and it has failed for over 25 years. If Change dont come soon
all persons over 65 will be wiped out , including me.
A huge problem for seniors is the low interest rates paid on savings - often a main source of income. Lower rates benefit borrowers, esp on mortgages, but often seniors have either paid off their homes or don't need or want loans on their property.
Without secure income from savings, investments are only other option, but rates of return on low risk &/or short-term choices are extremely low as well. Longer-term & higher risk options are usually not recommended for low income people and the very elderly.
Seniors are also forced to withdraw from retirement plans even if they don't need those funds and may have to pay taxes on that income as well.
Lack of ability and opportunity to shop for discounts using online sources also means they pay more. Internet savvy shoppers can usually get the best deal but that requires available computer time & expertise which seniors often lack.
A real threat is now cyber crime, identity theft and various scams targeted to the elderly, ill and naive. Most seniors grew up in a time & place where they trusted people and when risk of harm or losing things was very different. They need to learn some new ways to protect themselves.
What we as children as well as friends & relatives of the elderly is help them as much as possible and watch for problems or unusual activity. We all get older and lose ability to keep up with new technology so help someone now and hopefully someone will help you later.
What a timely article. My parents could be the poster children of this dilema. Their SS and pensions are fixed but the cost of everything continues to rise. Their autos are about shot, home has dropped in value and they have watched as retiree benefits have shrunk or disappeared. Their need and cost of meds has risen with no relief in sight. This causes depression and frustration for them. This isn't how they thought retirement would be....
we were taught to invest in mutual funds, our money would grow, then when close to retirement move your money to the safe place...and live on the interest....well with interest rates at 1% or less you need 2.5 million saved to net $25,000 a year...who has that much money saved? if interest rates were higher maybe the seniors could have some interest income from their savings instead of spending their savings down.
I then decided that my income above that amount would be divided into two equal parts: one half goes into my nest egg to replace the money needed for the next car or other major expense, and one half toward vacations and other extravagances.
That makes my finances self-regulating and allows me to live below my means. If it turns out I blow money on too much fast food, hobbies, etc. then the vacation becomes visiting relatives and fishing the local waterways instead of touring Europe, etc.
Old retiree's used to have income from interest on CD's and IRA's. The bailouts (giving unearned money to the banks) made our interest disappear. The banks now have free money from the taxpayers (increasing the national debt) and no longer need to depend on their investors. Thanks to Mr. Colson, Mr. George W. Bush, Mr, Bernanke, Mr. Obama, Mr. Guitner. etc. - this recession isn't over by any means!
Employment figures must be based on "full time" jobs. These jobs (with benefits) should pay more than the minimum wage.
Bailed out automobile companies shouldn't be giving those huge bonuses to their employees until they have repaid the government! They should also keep their profit margins low in order to improve sales. (noticed any automobile adds quoting the actual price of an automobile - only a monthly payment amount to lease or buy the vehicle.)
Maybe taxes should be increased for the wealthy one percent. They are the people that profited from all those government bailouts.
Three items that should have been emphasized.
1. Fed financial policies designed to help the entire population destroyed the earning potential from fixed income investment held by seniors.
2. Notwithstanding number 1 above, seniors have a disproportionate share of the wealth and are supporting and taking in younger relatives and young adult children in record numbers.
3. While there may be exceptions seniors will survive financially.....the question is, "Will the country survive under it's current fiscally unsound financial policies?"
Seems Simple to ME -- Just Go Back To Your Country of Origin with Your Children - Period
My Dad worked till he was 73 --I GOT Laid Off at 63 FOR LIFE!
Interesting. Wife and I, both retired, now help our children, (who both have full time jobs,) but have had a bankruptcy, and are having a hard go of it with three children still in school, and living at home. I don't know what the entire answer is, but I do know the incentives are not there for for the modern youth, especially if they see how their grandparents are getting by, and know the family history of hard, steady, employment.
Remember the old saying "Retire, and enjoy life?" Next question - HOW? Until OUR government stops giving billions of dollars away to foreign nationals, multi-billion dollar corporations, and groups of people determined to live on the taxpayers back, nothing is going to get better, just worse.
The "true income" of seniors is declining faster than the rise in government spending and waste.
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