Life changes as we age, with various financial implications.
We know one American Dream is to find a good job, buy a home, start a family, take a vacation, send the kids to college, and finally enjoy a well-deserved comfortable retirement. After death, many hope to bequeath assets to heirs.
But what is the reality of the dream for seniors? What are the experiences of those whose children are grown, and for whom retirement is (or may not be) a reality? Have they reached a long-awaited golden age?
Various perspectives exist as to the adequacy of retirement readiness.
“More People Feel Like They Might Actually Have Enough Money in Retirement,” says one study, indicating 52% believe they will be able to swing retirement.
Meanwhile, a Fed survey reveals “Many Americans Have No Retirement Savings.” Results show nearly one-third have no savings or pension, and 38% intend to forgo retirement or work as long as they can.
Despite conflicting views regarding readiness, “the actual rate of success for the current generation of retirees is less examined,” says a report by the Employee Benefit Research Institute (EBRI).
“This information is crucial to benchmark the relative success or failure of future retirees.”
This week, an examination of the financial circumstances of today’s Golden Agers. What takeaways exist for future and current retirees and their financial providers?
‘The afternoon knows what the morning never suspected.’—Robert Frost
EBRI provides “A Look at the End-of-Life Financial Situation in America.”
Financial facts of recently deceased older Americans tell important stories:
“Further research is needed to find out when retirees ran out of money—when last observed, or many years before death,” notes EBRI.
A recent Federal Reserve study, “Report on the Economic Well-Being of U.S. Households in 2014,” further discusses retiree incomes. Most retirees (51%) worked full time until retirement, and then stopped working entirely—more than twice of those still working who expect to do the same.
Still, 17% “eased into” retirement by working less hours. Others continued to work: 6% had retired but returned to full-time employment; 17% returned part-time. Nine percent became self-employed.
Regarding income, 89% take Social Security payments, 62% have traditional defined benefit pension, half tap savings beyond designated retirement funds, 45% use individual retirement accounts, one-third draw from defined contribution plans, 12% spend real estate proceeds, and 8% earn wages.
Four-percent rely on family to cover the bills.
Another look at Social Security by the Senior Citizens League shows that Social Security Cost of Living Adjustment (COLA) is up 1.4% annually since 2010, but “typical senior costs have increased much faster than COLAs over the past 15 years. As a result, beneficiaries who have been retired over the past 15-year period have just 79% of the buying power they did in 2000.”
‘Embrace aging.’—Mitch Albom
“More Older Americans Are Being Buried by Housing Debt,” notes ABC News. Thirty-percent of Americans 65 and older had a mortgage payment in 2013, compared to 22% in 2001. For those over age 75, 21% held a mortgage in 2011 compared to 8% in 2001.
Further, median mortgages held by consumers 65+ are also up, to $88,000 from $43,400. And a “substantial share” of older consumers are underwater on their homes (they owe more than their houses are worth).
“In the worst cases, hundreds of thousands of older Americans have lost homes to foreclosure.” That was true for 1.5 million home owners age 50 and up between 2007 and 2011.
In “Bankruptcy by the Numbers” from the U.S. Department of Justice, statistics show credit card debt grows steadily by borrower age, “about five times as high for debtors 60 or older,” compared to those under 25. On average, for bankruptcy filers, this amounts to $35,917.
The data, not certain to be representative of all Chapter 7 cases, shows card debt “accounts for the vast majority of total unsecured debt reported by debtors 60 or older.”
Also alarming: “Student Loan Debt Seriously Hurting Retirement Dreams” as “retirees are carrying unprecedented amounts of student loan debt.”
Student loans comprised 15% of installment debt as of 2013, compared to 1% in 1989.
“Average loan debt for retirees increased from $400 in 1989 to more than $2,300 in 2013.”
Medical debt, too, is common for seniors, according to debt.org. The average annual nursing home rate is $82,673.
Long term care insurance is pricey, too, costing $2,000 annually for singles 55+ or $2,400 for a couple.
‘The really frightening thing about middle age is that you know you’ll grow out of it.’—Doris Day
The National Council on Aging paints another grim picture as “Over 23 million Americans aged 60+ are economically insecure—living at or below 250% of the federal poverty level” or $29,425 annually for a single individual.
Transportation issues, dwindling savings, poor nutrition, and big housing and healthcare expenses mean “for older adults who are above the poverty level, one major adverse life event can change today’s realities into tomorrow’s troubles.”
One-third of senior households are out of cash each month after meeting expenses. Fourteen-percent of those 65+ contend with negative net worth in retirement. Merely one-third of eligible seniors 60+ partake in the Supplemental Nutrition Assistance Program.
And, “A majority of older adults have unsustainable housing costs, with 59% of older renters and 33% of homeowners with mortgages spending more than 30% of their income on housing.”
Sadly, also note “More Seniors Are Going Hungry,” per CNN. “In 2013, 9.6 million Americans over the age of 60—or one of every six older men and women—could not reliably buy or access food at least part of the year.”
To further complicate the situation, seniors face unique financial challenges like elder financial abuse--costing $36.48 billion per year—12 times earlier estimates. And, “As Cognition Slips, Financial Skills are Often the First to Go.”
Statistics about today’s golden-agers do not tell a cheerful story for them or for future generations if they serve as a benchmark for society. Many face dire financial challenges that equate to large insecurity.
But we can learn from their experiences and facilitate change with awareness of their unique circumstances.
How can your credit union make a difference in the present and for the future? Innovative savings strategies or services? Community outreach programming? Targeted financial literacy efforts? Know who is in your community and anticipate their needs.
Per Oscar Wilde, “Wisdom comes with winters.”