Most of us look forward to a retirement filled with leisure and relaxation, but many older Americans are facing financial difficulties that are destroying their retirement dreams.
Historically Low Interest Rates
For almost a decade, the Federal Reserve has kept the federal funds rate at a record low. This might be good if you are refinancing debt, but it is disastrous for those who stay in fixed-income investments such as certificates of deposit, money market accounts, savings accounts and bonds—all long-time favorites of seniors who are more risk-averse than other investors.
Low Trust in the Stock Market
The recession provided an opportunity for long-term investors to snap up stocks at attractive lower prices. But for many seniors, it was a reminder of the volatile nature of the stock market which is contrary to their more conservative investing approach. Many of them stayed in their low-yielding fixed-income investments and lost out on the subsequent gains of the rebounding market.
Fight back: Be willing to invest a portion of your investments in the stock market. It’s one of the few places you can invest your money that, over the long term, will outperform inflation. And with people living longer today, your savings will need to last longer than before.
Rising Health Care Costs
Medicare doesn’t cover all medical costs, and out-of-pocket expenses can be substantial. One survey found that 20% of seniors did not see their doctor because of the out-of-pocket costs. Also, the costs of drugs, diagnostics and medical devices continue to rise.
Fight back: Use some of your savings, investment income or work income to purchase supplemental health insurance that will help cover medical expenses not covered by Medicare.
Social Security Issues
According to the Social Security Administration, more than half of all couples rely on Social Security for at least 50% of their retirement income, and almost half of unmarried seniors rely on it for at least 90% of their retirement income. But the cash reserves that supply this income are in trouble and, unless Congress addresses the problem soon, they could run out by 2033.
Unfavorable Job Market
Going back to work is an option for many seniors who have little retirement income or rely heavily on Social Security income. Yet it takes older workers longer to find employment and they are often competing with younger workers who are willing to accept lower wages.
Fight back: Working longer at your current job may be a viable option. You may also be able to find paying work in a hobby or avocation. You may even be able to start a small business to supplement your income.
Debt…and Feeling Obligated to Help Adult Kids
Fully 45% of all homeowners over the age of 62 still have a mortgage payment. Many have credit card and other consumer debt. Of those homeowners age 60 and over, who are no longer working, 43% admitted to helping their adult children pay their bills. Many seniors have student loan debt for themselves, their children and dependents going to college.
Fight back: Learn to say “no,” especially if your retirement funds are limited. This is your retirement, and your children and grandchildren need to respect that. If you are earning extra income, use some of it to pay off your debt.