Monday, October 27, 2008
IN MY OPINION:
The Financial Plight of Retirees
BY TED RUHIG
Now that Congress has done its duty and bailed out the “money folks” with U.S. dollars, a closer look at the impact of the economic downturn on the income of retirees is in order. A choice has to be made for the presidency in just a few short weeks.
The New York Times recently editorialized about the plight of retirees with the following quote: “Even before the housing bubble, the country was facing a retirement crisis, with most Americans saving too little, if anything, for their post-working years. The housing bubble - and subsequent bust - has made that bad situation even worse.”
News reports show that older Americans with investments are among those most seriously impacted by the economic downturn. Retirees also have the least chance of recovering.
Alicia H. Munwell, director of the Center for Retirement Research at Boston College, observed: “If you are 45 and the market goes down, it bothers you, but it comes back. But if you’re retired or about to retire, you might have to sell your assets before they have a chance to recover.”
Today’s retirees have less money in savings, longer life expectancies and greater exposure to today’s market risk than any since World War II. Because of their sensitivity to the market, they are especially attuned to what is going on, particularly the promises made by the presidential candidates. They have plenty of money, but are worried that it might not last in this world of dividends. As stocks fall in value, the expected dividend yield just might not be there.
Many folks are generating money through refinancing their homes. Since 2001, Americans over age 63 pulled $300 billion out of their home equity through refinancing.
According to AARP, more workers are postponing retirement and borrowing from their retirement accounts. This behavior is reflected by the Bureau of Labor Statistics, which reports that after three decades of decline, a higher percentage of Americans older than 55 are now working than any time since 1970.
Most of these folks are not working because they want to, but because they need the income. A typical worker, in order to maintain his or her standard of living, will have to work until age 70, according to current projections.
Of course younger people also have been feeling the stock market gyrations, but for some of them the fact is that they can now purchase a home for much less than they had anticipated. So they may face less negative impact from the market’s ups and downs.
For older people, there appears to be no upside to this hard luck. There is no group more directly impacted by the financial crisis and the Wall Street bailout than retirees. People over age 60 own nearly half of all U.S. equities. They are thus following with great interest the program promises of the presidential candidates.
The situation in Florida is a case in point. Nearly one-third of Florida’s registered voters are over 60. They vote at a much higher rate than younger people. And they are thinking hard about who is going to help them through the current financial crisis.
Polls indicate that in the Sunshine State, McCain has lost what once was a significant lead, even among Florida seniors who call themselves Republican.
A Quinnipiac survey released this week, reported by National Public Radio, shows McCain trailing Obama in Florida by 8 points. And the newest poll conducted by the Pew Research Center found the Illinois senator has taken a significant lead over his Republican rival, thanks partly to voter confidence in Obama’s ability to deal with the financial crisis.
Yet, north-central Florida, with its nearly 70,000 seniors, is a great Republican stronghold. Bush won more than 60 percent of the 2004 vote there, and turnout approached 80 percent.
Who knows how the Florida vote will turn out? Just this week, Florida Republican leaders hastily convened a top secret meeting to grapple with Sen. John McCain’s sagging performance in this must-win state. Four new polls showed Sen. Barack Obama leading, a reversal from just a few weeks ago when McCain was opening up an advantage.
A New York Times headline summarized McCain’s challenge: “Economic Crisis Fuels Obama in Tight Ground War for Florida.”
Time magazine observed that Vice Presidential candidate Sara Palin is propping up the sagging Republican campaign. She is being dispatched to Florida this coming week to raise money and shore up support among Republican loyalists, many of whom are seniors, during a two-day swing that will cover more than 800 miles and include four public rallies.
Palin’s job will be to reel in Obama and keep Florida. Whether she can do this, in the midst of the news of the $700 billion bailout, is an open question. With Wall Street continuing to dominate the news, it will be difficult to change the public perception that the Democrats are better able to deal with the financial crisis facing seniors and the rest of the country.
— Capitol News Service