Older Americans hit hard by the Great Recession

The financial future looks bleak for older Americans who have lost their jobs or their retirement savings during the Great Recession of 2007-2009.

The Government Accountability Office’s study, “Income Security: Older Adults and the 2007-2009 Recession,” found that older Americans between the age of 55 and 64 hit hard by the recession are facing difficult choices of delaying their retirement, retiring with a substantially lowered standard of living, or saving money by forgoing medical care.

Key Findings from GAO Report

The unemployment rates for workers between 55 and 64 doubled during the recession, jumping from 3.1% in 2007 to 7.1% in 2010. The GAO study found that unemployed older workers have more difficulty finding new jobs and remain unemployed for a longer period of time than their younger counterparts. “They may have skill issues with shifting to another job. They may have health issues. They may also have, frankly, employer issues. Employers will not always look to hire older workers. So it is very difficult for older people, once unemployed, to go back and get a job,” said Barbara Bovbjerg, GAO’s Managing Director for Education, Workforce and Income Security Issues.

To make matters worse, many older Americans have seen their retirement savings and net worth decline due to the volatility in the stock and housing markets. The average income for adults 55 to 64 fell by 6% during the recession, and the median household net worth dropped nearly 14% between 2007 and 2009. “Neither stock nor real estate have recovered from their low points during the recession, and continued low interest rates mean that savings provide little, if any, interest income after inflation,” said Bovbjerg. “In these circumstances, those approaching retirement find they may not be able to retire at all until such time that markets recover.”

The Great Recession has pushed more older Americans into poverty. Poverty rates for adults 55 to 64 rose from 8.6% in 2007 to 10.1% in 2010. As older Americans lose their health insurance or exhaust their savings, they are forced to delay their medical care, seek food assistance from the Supplemental Nutrition Assistance Program, or receive Social Security early at the age of 62 with 25% less benefits.

Growing Reliance on Social Security 

Social Security has played a key role in keeping elderly Americans out of poverty during the Great Recession. The poverty rate for American seniors 65 and older actually decreased from 9.7% in 2007 to 9% in 2010. “Among all the age groups, only the elderly did not see an increase in poverty during the recession and its aftermath. This income stability is almost certainly a result of the near universality of Social Security and its important protective features, such as its lifetime guarantee and its cost of living adjustments,” said Dr. Heidi Hartmann, President of the Institute for Women’s Policy Research.

However, American seniors are relying more on their Social Security benefits to make ends meet as other forms of income – savings, retirement assets, and pensions – have dwindled during the recession. According to IWPR’s analysis, more than half of women 65 years and older rely on their Social Security benefits for 80% of their retirement income. Cuts to Social Security benefits would push these women – many living on less than $12,080 a year – deeper into poverty. Furthermore, Americans entering into retirement now and in the next 20 years will likely depend even more on Social Security as their primary source of retirement income due to the financial losses suffered during the Great Recession, according to Hartmann.

The income stability provided by Social Security would be eroded without cost of living adjustments (COLA) that mitigate the rising cost of health care. According to the GAO report, the cost of medical care for seniors have increased by 48% between 2000 and 2010. The average out-of-pocket medical costs for seniors 65 years and older was $4,846 in 2009. “Does the current formulation for Social Security COLAs adequately reflect the purchasing habits of senior citizens? I can tell you that in Vermont I hear over and over again from senior citizens who tell me, ‘Bernie, I don’t quite understand how they think that there has been no inflation when my prescription drug costs are soaring, my health care costs are soaring, and we don’t get a COLA,'” said Sen. Bernie Sanders (I-VT). (Last week, the Social Security Administration announced a 3.6% COLA increase for 60 million beneficiaries in 2012, marking the first COLA increase since 2009.)

Older Americans Act Reauthorization

Low-income seniors are also increasingly reliant on programs funded by the Older Americans Act, which is up for reauthorization this year. The Older Americans Act funds support services for family caregivers, mental health services, disease prevention, job training, transportation and nutritional meal programs for the elderly. “With the growth in the older population and their economic struggles, the aging network organizations across the country are experiencing escalated demands for core services such as job training, help with applying for benefits, and subsidized meals,” said Dr. Sandra Nathan, Senior President for Economic Security at the National Council on Aging.

Expanding job training and placement programs for older Americans would help long-term unemployed workers like 61-year-old Gail Ruggles find gainful employment, save money for retirement, and rely less on Social Security benefits. Three years ago, Ruggles was divorced, in debt, and working five part-time jobs while raising two teenagers when she was introduced to Vermont’s Senior Community Service Employment Program. The SCSEP program, funded by the Older Americans Act, trained older Americans like Ruggles and placed them in jobs with local non-profit organizations. Ruggles credited the SCSEP job training and employer incentive program for helping her land a full-time job at a growing medical research and development firm in Vermont.

“Being a participant in SCSEP through Vermont Associates gave me things welfare programs never could. It gave me occupational skills and special training to obtain real lasting employment. It gave me confidence in my abilities. Ultimately, it gave me the stepping stones to become economically self-sufficient,” said Ruggles. “I’m not even thinking about collecting Social Security at 62 because I don’t have to. I’m actually building a stronger retirement. Vermont SCSEP helped me turn my life around. It’s a program that works.”

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