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Are Seniors Struggling Financially?

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Understanding the Challenges of Retitrement Finances.

The U.S. Chamber of Commerce reports that it is likely the U.S. will experience a mild, but short, recession in the middle of 2023. The expected small recession will be caused by lower consumer and business spending due to rising interest rates. Experts also anticipate that inflation will come down significantly during 2023. It is believed that the Federal Reserve’s anti-inflationary policies designed to curb demand and tighten financial conditions will start to bring prices down much closer to the Fed’s 2% inflation target over the course of the year.

With the expected financial ups and downs in the coming year, it is understandable that many seniors are concerned about their savings and retirement planning. So, what effects of the recession should seniors expect? Are seniors struggling financially right now? And what are some steps seniors can take to avoid economic hardship?

Aging and the Economy

Aging and the economy are related in many ways. And the ups and downs of the economy uniquely impact seniors, both before and after retirement. Here are a few ways the downturns in the economy impact seniors in both situations:

Approaching Retirement

  • Most households approaching retirement still rely on income from work. A recession could cost them their job.
  • If a job is lost, a senior may be inclined to begin taking Social Security benefits early, lowering the amount they can receive. 
  • Declining house prices could impact the collateral value of a house.
  • Increases in debt could eat into retirement savings.

After Retirement

  • Declining house prices could affect their ability to pay for current expenditures, but also to afford a place in an assisted living facility, a continuing care retirement community (CCRC) or a private nursing home.
  • High inflation can reduce purchasing power, even of an indexed benefit. Social Security benefits, for example, are adjusted once a year, based on the increase in consumer prices over a period ending a few months before the adjustment. However, the price of groceries and those of other goods and services increase continuously through the year.
  • Retirees often turn to their savings to get them through retirement. But when inflation occurs, the purchasing power of those savings diminishes, creating a need to withdraw larger amounts of savings to cover the costs of living, effectively shrinking the lifespan of the retirement savings.
  • Stock market declines could impair the ability to pay off student debt and the ability to make inter vivos transfers to support younger family members who had been thrown out of work.

Financial insecurity currently affects more than 15 million seniors in the United States. Older adults are now facing economic insecurity because of many factors, including:

  • Social Security benefits are not enough to live on without additional sources of income.
  • Many older adults do not save personal funds for retirement, while others live longer and outlast their savings.
  • Healthcare for seniors is costly and now takes a larger share of a senior’s income than in previous decades.

Lowering Recession Impact for Seniors

The threat of financial insecurity can lead anyone to look for options to safeguard their savings and their future. For seniors, especially those of retirement age, it can be comforting to have a plan in place ahead of time. Here are a few things to remember when thinking about seniors and the economy:

  • No one individual can prevent a depression or a recession or control high inflation. 
  • If these events do occur, it is likely to cause at least some level of economic hardship.
  • It is possible to adopt strategies to help survive financial downturns and lower the recession impact.

For seniors who are retired, or those who are considering retirement, here are some steps that can increase the odds of surviving a recession during retirement years:

  • During tough times, it is important to be able to react appropriately and think clearly. Put mental and physical health at the top of the priority list to be able to best handle anything that comes.
  • Maximize Social Security benefits by delaying the start of receiving the benefits.
  • If possible, maximize income from traditional pension plans or cash balance plans.
  • Create a dependable social circle of peers, family and friends who can provide support during trying times. Socializing can also bring health benefits  for seniors.
  • Establish a plan to make systematic withdrawals from retirement accounts to survive a market downturn; consider using a portion of savings to buy a cost-effective annuity, which can act as a personal pension.
  • Adjust living expenses to match retirement income. Creating a streamlined monthly budget can help keep spending on track. Moving into a retirement community, like Mount Prospect Senior Living, can help seniors establish one monthly payment that covers nearly all budgetary needs. 
  • Take calculated investment risks for the opportunity to grow savings and retirement income.
  • Stay up to date on retirement trends, financial planning for seniors and new strategies for retirement planning.

About Mount Prospect Senior Living

At Mount Prospect Senior Living, we want our community to feel like home. Mount Prospect is designed to meet the needs and wants of active, engaged seniors. The Mount Prospect team utilizes the Vibrant Life® program  to allow residents to use creativity and personal preferences to create their day in any way they like. The program challenges and inspires residents, encouraging new adventures and making suggestions based on individual interests and physical abilities. We offer assisted living and memory care apartments  to fit every need, and our team is here to help you make your new space into a new home!

At Mount Prospect, we would love to invite you and your family to visit our community and learn more about our programs, our culture and our care. Have questions before you make the trip? Call us at 847-250-6029 today — we are happy to answer any questions you have!