WHEN TIMES GET TOUGH, THE LEAST FORTUNATE BECOME EVEN LESS FORTUNATE

By Craig Erwin, Ph.D.

The pandemic has been cruel to a great many people. So far it has killed nearly half a million people in the U.S. alone, and thrown millions out of work. For the survivors, it has often been cruelest to those who were already disadvantaged (e.g., homeless, elderly, disabled, women, and children).

Traditionally older workers have had greater job security than younger ones, perhaps in part due to the strength of unions in the US. But, for those who have lost jobs in the pandemic, older workers have been hit hardest; more likely to lose jobs and less likely to be hired back. The Equal Employment Opportunity Commission has yet to provide statistics on complaints filed since Covid-19 started raging, but there is a great deal of anecdotal evidence that employers are using the pandemic as an excuse to dump older workers, especially those with relatively high salaries. Many older workers with seniority have been axed while their younger and less senior colleagues have kept their jobs. For the six months starting in April 2020, the rolling average unemployment rate for workers 55 and older was 9.7 percent, marking the first time in almost 50 years that workers 55 and older had a higher unemployment rate than those aged 35 to 54 (for six or more months).

The unemployment rate for people 65 and older quadrupled between April 2019 and April 2020. Workers between the ages of 25 and 44 fared much better than seniors. Although the unemployment rate rose sharply for just about everyone between February 2020 and November 2020, it was higher for seniors than anyone else.

One outcome of age discrimination by employers is that many who lose jobs get discouraged after failing to find new jobs and retire earlier than planned. Many of those will retire in poverty or have far less wealth than planned since they will have had fewer years to save for retirement. A recent study showed that 2.9 million workers between the ages of 55 and 70 exited the workforce between March 2020 and June 2020, approximately 7 percent of the total workers in that age group.

Even before the pandemic, the number of retirees living in poverty was shocking, as was the number of people nearing retirement age with excessive debt or little to no savings. The fallout from Covid-19 has made a bad situation worse for many seniors and soon-to-be seniors..

There are no simple or cheap solutions. The federal government is in no shape to help seniors in financial trouble, given record levels of federal debt and decades of insufficient spending on infrastructure, schools, and the like. In fact, the federal government is more likely to cut social security benefits or increase taxes on retirement vehicles such as IRAs than it is to increase or broaden retirement benefits, given its precarious financial position.

Unfortunately, the best solutions are not very helpful for those at or near retirement age because they involve saving and investing aggressively for retirement when one is young. Although those at or near retirement age have no choice but to save and invest aggressively, it will be very difficult to accumulate substantial wealth because they have started very late. Although it is never too late to start saving, the later one starts, the less she is likely to accumulate. About 10,000 Americans turn 65 every day and, if they have little or no money saved, there is not much they can do except keep working well past the traditional retirement age and save every penny possible. If they are at or near retirement age and lose their job, all they can do is keep looking for work until they find it. If they were decades younger, they would have great options, but the options dry up as they age.

It is possible to amass a substantial sum by retirement age, and to retire comfortably, if one starts saving and investing aggressively in her 20s. With decades for compounding to work its magic, such a woman can amass a million dollars or more by saving a modest amount from each paycheck and investing it in the stock market. Obviously, that method won’t work nearly as well for individuals in their fifties with far less time to put compounding to work. They would have to save a painfully large portion of each paycheck compared to someone in her twenties. As always, an ounce of prevention is worth a pound of cure and hindsight is 20-20 vision.

Click on the following links for more information on preparing for retirement.

https://womenretire.com/the-best-way-for-most-of-us-to-accumulate-wealth-dollar-cost-averaging/

https://womenretire.com/start-your-new-year-off-right/