Senior Spectrum
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Sept 2008
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Economic Outlook
Retirees With Fixed Incomes Financially Strained as Costs of Health Care and Other Essentials Increase
Retirees are seeing "inflation wring much of the value out of their fixed incomes," according to AARP.
AARP spokesperson, Jim Dau, told USA Today, "By any measure, people who are retired are bearing the worst brunt of the economic slump," adding, "because they're living on fixed incomes, they're just getting crushed on food and medicine that they can't do without." A recent AARP survey found that 59 percent of residents ages 65 and older were experiencing increasing difficulty paying for their medications, food and gas.
John Rother, AARP policy director, said an alternative inflation index that tends to rise faster than other inflation gauges should be used for Social Security because it reflects items that more directly effect people ages 62 and older. However, Rother said he doubts such action will be taken by Congress unless there is a major effort to overhaul the Social Security system. The inflation adjustment in 2008 for Social Security payments was 2.3 percent.
"No one disputes, though, that in one specific way, seniors are losing ground with Social Security" through Medicare costs, which are "gobbling up a big chunk of their Social Security checks." CMS figures show that about 26 percent of a typical Social Security check goes to Medicare premiums, drug coverage, copayments, deductibles and other costs related to the program.
Bankruptcy Filing Rate Increasing Among Seniors
The rate of bankruptcy filings for people older than age 55 has increased since 1991 as a result of several factors, including rising costs for consumer goods and health care, according to a Consumer Bankruptcy Project analysis that will appear in the January edition of the Harvard Law and Policy Review.
For the study, researchers from Harvard Law School examined a sample of more than 6,000 noncommercial bankruptcy filings in 1991, 2001 and 2007. The study found that bankruptcy filings for the older-than-55 age group had increased from 8 percent in 1991 to 22 percent in 2007. According to the analysis, the bankruptcy filing rate per thousand people increased by 40 percent for seniors ages 55 to 64, by 125 percent for seniors ages 65 to 74, and by 433 percent for seniors ages 75 to 84. Researchers also found that the rate of bankruptcy filing for people younger than age 55 declined during the same period.
Elizabeth Warren, a Harvard Law professor and an author of the study, said, "There's no evidence that the problem is consumerism," adding that seniors are incurring debt to meet needs such as medical treatment. She said, "Older Americans are hit by a one-two punch of jobs and medical problems, and the two are often intertwined," adding, "They discover that they must work to keep some form of economic balance and when they can't, they're lost."
Women Disadvantaged in Retirement
A July study by the firm Hewitt Associates examined the projected retirement levels of nearly 2 million employees at 72 U.S. companies. According to the study both men and women are on track to replace 85 percent of their pay at retirement. However, the average woman will need to save 2 percent of pay more per year than the average man, over 30 years, to achieve the same standard of living.
Reasons listed include lower salaries, conservative investing, longer life expectancies, and higher retiree medical needs. In addition, caregiving demands mean that women spend less time in the labor force and are more likely to work part-time.