Senior Citizens in Poverty

Senior Citizens in Poverty

Senior citizens in povertyHere’s an eye opening statistic for you – Prior to the creation of the Social Security System in the 1930’s, approximately 75% of senior citizens in America were living in poverty. This figure has been dramatically reduced today to just below 10%, thanks to employee pensions, Social Security and also retirement savings accounts.

But still, here in America today, many senior citizens with income levels just above the poverty level continue to have financial struggles well into their retirement.

Just as alarming are the results of a study that was done by Brandeis University. This revealed that 75% of senior citizen households in America are in a precarious position economically.

Furthermore, they have very little or no financial wherewithal to fend off financial disaster if they are presented with some traumatic issue, such as illness. This is a very sad commentary for anyone living in America, one of the most affluent countries. Another sad statistic is that the average life span in America is approximately 78.5 years and we now have many more senior citizens facing the bleak prospect of seeing their retirement savings disappear before they pass away.

[bctt tweet=”In the world today, most senior adults are forced to live on a fixed income” username=”HBSMoneyTips”]. Just one serious medical issue or even a major home repair can lead to financial ruin, and seniors generally have no means to earn any extra money.

In our opinion, the best option is to enter retirement without debt and to avoid all debt during retirement. There is one option available to homeowners that will allow them to cash in on the equity in their home. This is a reverse mortgage. We need to make this very clear…we are not recommending a reverse mortgage.

This industry is rife with scam artists and others that are out to swindle senior citizens. We highly recommend that seniors find a reputable financial adviser that they can trust and feel comfortable with. Discuss this option and any other issue with him/her to avoid being ripped off.

Savings Disappear

Many senior citizens tend to be conservative and generally keep most of their savings in blue chip stocks and bonds. They then depend on the dividends and interest to supplement their social security to cover their monthly expenses. Whatever amount that is the principal in the account is held for emergencies. However, with the average life span increasing, those financial resources must last longer.

Today, because of the increased life span, senior citizens are threatened with a lack of economic security. Their limited financial resources are pressed to cover additional years of retirement.

To make matters worse, expenses for health care and the necessities of life, like housing and food, have increased substantially, and seniors simply can’t live on their retirement savings.  The current financial crisis hit most senior citizens quite severely.

Stock market losses on their investments took its toll as well as the sharp decline in interest rates. Interest from savings that paid bills was curtailed. We all saw trillions of hard earned dollars literally disappear from our portfolios. However, seniors who have limited cash flow with no fall back suffered the most because they simply weren’t able to bounce back from the large losses.

The Employee Benefit Research Institute conducted a study that revealed senior citizens that are living in poverty has been steadily increasing since 2005. An alarming statistic shows that seniors in the age group of 65 to 74 increased from 7.9% in 2005 up to 9.4% in 2009.

A very sad commentary for a political administration that is more concerned with foreign aid instead of their own citizens who “paid their dues” with many tax dollars. We have elected officials with huge egos who like to strut like peacocks throwing away billions of dollars to countries who want to destroy us. These egomaniacs have also caused more seniors in the 75 to 84 age group into dire poverty with an increase from 7.6% to 10.7%.

It’s a fact of life that as we get older, the odds of having a serious medical issue increases substantially. The condition and the associated costs can place a senior into poverty very quickly, especially if they must enter Assisted Living or a nursing home. Any assets these individuals have accumulated disappear like the magician who says “now you see it – now you don’t”.

A Reverse Mortgage

This is a creative mortgage loan available to senior citizens who have equity in their home. These loans are not paid back like a regular mortgage, and the balance actually increases over time as funds are withdrawn and interest and fees accumulate. When the borrower (s) move, sell the home, or die, the loan is repaid.

Because there is no repayment during the loan term, there is no requirement to have a certain income level or to have a high credit rating.

The borrower (s) can borrow funds to cover living expenses, or to have a line of credit, or even a lump sum. This type of borrowing is a very hot issue because of scam artists that were initially involved. Extremely high fees were charged, and fees are still quite high.

Other problems were created as well. I wrote an article a couple of years ago with recommendations that I believed would plug most of the holes. The FHA has made a few changes but has a long way to go. They require that borrower(s) attend an approved counseling course to make them aware of the possible risks.

Scams & How to Avoid Them

Most scams that we see today are perpetrated against senior citizens. Many are too trusting, some may have minds that are affected by dementia or Alzheimer’s, and some just won’t admit they have been conned. Just this past year, I had an 82 year old client that was conned out of $5,000.00 by a scam artist.

Senior citizens must be constantly on guard and question everything being offered to them. If it sounds too good to be true, then it probably is. Period. Thieves is a better word for these low life scum who offer bogus health insurance policies to cemetery scams.

Identity theft is common and seniors must be careful not to give out their SSN, credit card numbers, bank accounts, etc. to anyone. The telephone is definitely taboo. Unless you’re 1,000% certain you know the caller, HANG UP immediately. Forget being kind – being rude may save your life.

We have a strict policy in our home, we don’t buy anything or contribute money over the telephone. We hang up quickly on these types of calls or any call coming in at meal time.

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