The economic downturn has led to personal cutbacks on medications and funding retirement savings, according to the AARP’s survey on The Economic Slowdown’s Impact on Middle-Aged and Older Americans.

AARP examined older Americans’ responses to the economy in April 2008. The finding: that people over 45 share concerns about both the current and future states of the nation’s economy. The downturn is characterized as a triple-threat combination of stagflation (slow growth + high unemployment), job losses and rising fuel prices.

As a result of these macroeconomic concerns, older people have adapted their personal microeconomic behaviors. The chart on the right details some of these behavior changes, led by difficulties in paying for essential items (food, gas, meds) and utilities, reducing spending on entertainment and eating out, and postponing travel plans.

Furthermore, 1 in 4 older people have prematurely withdrawn funds from retirement investments such as 401(k)s and IRAs, and 1 in 3 have stopped putting money into these investment vehicles.

The survey was conducted in April among a nationally representative sample of 1,002 people age 45 years and older.

Health Populi’s Hot Points: The macroeconomic downturn is reflected in individuals’ concerns with tightening credit markets, declining home values, and stock market losses. 72%, or 3 in 4, older peoples’ retirement vehicles have lost money in the past year due to the downturn in the stock market. This has led to the dark financial outlook shared by older Americans.
The personal adaptations to the market decline varies by life stage, according to the AARP data. Those over 65 are now having trouble paying for essentials given fixed incomes. This group of people have already made adjustments to consumptions since retiring. For older boomers age 55-64, with “retirement in their sights,” the view is mixed to negative. They took the biggest hit to their 401(k)s and have withdrawn funds — taking yet another hit in the form of early-withdraw penalties.
For the youngest boomers, age 45-54, the downturn hurts because this group is still in the midst of educating kids and building careers and savings accounts, along with paying off mortgages. This is the group most likely to curtail leisure time activities outside the home such as eating out, travel, as well as making major purchases.
As for health care, I see this as a wild card that I’ve been talking about with clients doing scenario planning on what the health system will look like in 2012-2016. If Boomers, as they begin to retire, confront eroding retirement investments and increasing out-of-pocket costs, we could have a mass generational call for a single-payer health plan.

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