This holiday season brings no glad tidings to America’s old folks, according to a recent report from the Urban Institute outlining the recession’s impact on older workers. The report is so concise and comprehensive—and so grim—that it is worth including here almost in it entirety. The gist of it is that old people are far worse off than they were in the last deep and protracted recession, in the early 1980s, because we have lost more jobs, more government benefits, and more of our life savings.
For older workers, this recession is unprecedented. Last month, 298,000 Americans ages 65 and older were unemployed, 50 percent more than when the recession began a year ago.
During previous downturns, relatively few older Americans were counted as unemployed. Although many lost their jobs, they generally retired instead of looking for work. During the severe 1981-82 recession, seniors’ unemployment rate grew by just 0.8 percentage points – only about one-fourth the increase for prime-age workers (25 to 54).
Today, however, seniors are nearly as likely as their juniors to join unemployment lines, because pink-slipped seniors can no longer afford to put their feet up. Shrinking Social Security benefits, traditional pension plans, and 401(k) balances combine with soaring health care costs to force them to keep pounding the pavement.
Workers who must start collecting Social Security today at age 65, rather than at the normal retirement age of 66, will permanently forfeit 7 percent of their monthly benefit. Premiums for Medicare Part B, which pays for doctor visits, eat up another 9 percent of Social Security benefits – triple the benefit hit in 1982.
Rising medical expenses, which consume 15 percent of older people’s budgets, can also jinx retirement. And only one in three large private employers offers retiree health benefits to supplement Medicare, compared with two in three in the 1980s. Meanwhile, Medicare’s new drug benefit has barely dented seniors’out-of-pocket spending.
Whipsawed by these trends, it’s no surprise that three in 10 Americans ages 65 to 69 were working or job-hunting in 2007, up from two in 10 in 1982. Paychecks provided nearly one-fifth of this group’s income in 2006.
The stock market shed about half its value over the past 14 months, destroying $2.8 trillion in 401(k) and individual retirement accounts and intensifying pressure on seniors to work. Older Americans have been hit hardest because those 50 and older hold nearly three-quarters of these assets. (During the 1981-82 recession, the S&P 500 index fell by only 6 percent.)
How the stock market performs matters more to seniors than it used to. A quarter-century ago, two in five workers in the private sector had pensions that paid a guaranteed benefit throughout retirement, no matter what jolts the economy or stock market took. Today, only one in five private-sector workers does.
Adding insult to injury, slumping home values are eroding seniors’ most important asset apart from Social Security and Medicare. The latest S&P/Case-Shiller home price index shows that San Diego home prices fell 26 percent between September 2007 and September 2008.