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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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.
I realize it's nice for you to have five houses all paid up, and no mortgage. But......I don't think for one moment you are going to Quote: milk the rent Unquote, and live on that.
You make know mention of any savings you may have, or even a Retirment Pension.Another point, you have your Reality Taxes each year, House Insurance. Also what about people moving out, how long before you get somebody else to take over that house? And believe me, unless you are able to do all the 'wear and tear jobs' yourself. you are going to have to drink that proverbial milk to keep your strength up.
I am retired, and have been for some time, and believe me, unless you have any of the above, those five houses are going to be your nemesis.
Anyway, good luck.
schoolbus, your statements hurt my heart and my mind. Being a person in Financial Services, you made some sense of what is going on in our Nation that isn"t being talked about.
What state do you live in, and what was your profession? and somehow , can you get me your e-mail address?
A good portion of the problem with seniors' income is the unusually low rates of interest. Many seniors put most of their savings in CD's, treasury securities, or money market funds because they don't want the risk of stocks. With the current low rates on these investments, senior consumers have lost a significant amout of purchasing power. Actually after taxes and infaltion these investments leave them with negative returns. Of course they could buy bonds, but if they need to sell them before maturity, rising interest rates (sure to happen eventually) will cause them a big loss in principal.
Who really benefits most by the low rates? The U.S. government. The interest on the national debt was $454,393,280,417.03 last year. Since the deficit is going to be about 1100 billion this year, the interest is about 40% of the deficit. Think what it would be if interest rates were at normal levels!
According to this year's Forbes Magazine billionaire list for the entire world, their combined net worth is 4.6 trillion dollars. If that could be liquidated and turned into U.S. dollars it would be only a fraction of the 16 billion of our debt. Of course we would have a lot less businesses and jobs for workers building large houses, yachts, luxury cars, and other luxury goods and services. Worst yet we would have ruined the economy of the rest of the world! The obvious solution is for the federal government to spend less. We can not tax ourselves out of the problem even if we took all of the earnings of wealthy people.
Mmorris, good reponse! I am getting ready to retire later this year. I will be 63, and had intended on retiring at 62. I figured one more year to build up savings and investments would not hurt. It doesn't seem all that long ago that a regular savings account drew 4% interest, and a long term CD much more. You could move some of your invetment money to those and pretty much live off of the interest without touching much if any of the principal. Same went for money market funds. Well, with interest rates near zero, that option is out the window. You can roll the dice and keep a bunch of investment money in higher return but higher risk funds, or move to the safer, but low return funds. The experts say never use more than 4-5% per year of your retirement funds. If you do that, you need to earn near 8% to recoup what you used, since you have less principal to earn from. Doing that today is very difficult.
I am going to do it anyway, as there is no guarantee on how long you live. It seems most of the "experts" that say to keep working untit full retirement Social Security at age 70 are half that age and aren't sick of having to get up early and work late for the past 40 or more years.
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After finding this i couldn't help but wonder how much this could help American citizens that are saving a nest egg for the future. If thousands of Americans start doing this will it be stopped ?or if someone introduces a bill to stop it,do you think the Republicans will gridlock it. I know where i am going when i win the lottery.
Most of the Casinos in my area are populated by people over 60, which makes me wonder how they can afford to be throwing away their money.
Those big Casinos aren't paid for by the winners.
Call me insensitive, but why would someone in their 40's and 50's ever consider buying another house? If you plan on retiring at 60-65, why would you still want a mortgage payment? And if they bought it thinking they could flip it in 2-5 years to gain a small profit to retire on, then that's call gambling folks. And sometimes, you lose.
Never ever bank on the value of your house for funding your retirement.
I'm so sick and tired of worrying....Every day is spent looking for an answer. I wake up anxious and fall asleep exhausted from worry. Sleep is my escape. I dread waking up because the mental chatter starts.
I worked hard all my life and did 'the right thing.' I saved, payed my bills on time and scrimped...I bought a house years ago and am in the process of refinancing to get money out and have a new track to run on. Everything went fine until the bank asked for more documentation and a recent check stub at the last minute. I was layed off a few months ago. My second mortgage is due.
I guess I will lose my house now.
Sorry...just need to vent.
Bless all of you and I hope things get better. We are tough and will survive this.
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.
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!
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