Thursday, July 31, 2008
Catherine Wilson, Bureau Chief
Seniors Caught In A Squeeze
Nancy Pelosi, Speaker of the House, announced last week that Congress was reviewing additional ways to stimulate the economy including the possibility of another tax rebate program, further interest rates cuts, or the reduction of gasoline taxes. Pelosi, and other members of
Congress on both sides of the political fence, voiced the economic concerns facing taxpayers. What Congress did not address, however, was how the potential solutions for the nation’s economic woes have had an adverse effect on the individuals least able to recover in the long
term – our nation’s seniors.
The Federal Reserve has lowered interest rates nine times in the past 1½ years in an unsuccessful effort to stimulate the economy. The Federal Funds interest rate has declined from 6.25 percent in June 2006 to 2.25 percent in April 2008. The reasoning behind lowering interest rates was to provide lower cost loans to businesses so they would be able to purchase more equipment and/or hire more employees.
Banks borrow money from the Federal Reserve at this discount rate and base their interest rates to their customers on the Federal rate. When federal rates decline, the rates the banks charge for loans likewise decreases. However, since the banks are now receiving lower rates on their loans to customers, they, in turn, must reduce the interest rates they pay on the deposits kept at their bank.
Anyone with savings in bank accounts or bank certificates of deposit (CD’s) may currently be earning four percent less interest on their savings than what they earned only two years ago. On $100,000 worth of savings, that represents $4,000 less in annual income. The majority of CD owners are seniors who depend upon the interest earned on their accounts to supplement their Social Security checks.
At a time when the costs of transportation, energy, taxes, and food are dramatically increasing, seniors also have to deal with lowered income. And, unlike younger age groups, they may not have the benefit of time on their side to “ride out” the current downturn in the economy.
Seniors are literally being squeezed from both ends, with higher costs and lower income, in today’s economy.
The Westchester County Department of Seniors is seeing a dramatic increase in severe economic distress among local seniors. Margaret, name changed, a volunteer with the agency, gave The Guardian examples of severe situations. “One elderly woman called us and told us that she could no longer afford to keep her car but she was concerned about how she would be able to get around without it. She was unfamiliar with the county’s bus system and worried about how she would handle an emergency without transportation. She felt like she was losing her independence,” Margaret said. “The seniors we speak to are dealing with less and less. They feel that the government cuts back aid to seniors and children first because they can’t fight back.”
Margaret gave two heartbreaking examples of struggling seniors: one local resident is an elderly mother struggling to care for her disabled son. She could not afford to pay for his medication out of her Social Security check and turned to the County for help. The second case was an elderly man who was looking for an affordable place to live. He was sleeping in Grand Central Station at night. “It’s heartbreaking to think that this is how our elderly are ending their lives, after giving so much to their communities,” Margaret noted. “We have so much money in this County. We need to make sure than none of our seniors are sleeping on the streets.”
Local government representatives agree with the need for more affordable housing for seniors but note the strong opposition in the communities where such housing is being proposed. Paul Feiner, the Supervisor of the Town of Greenburgh, told The Guardian that there is a
great need for affordable housing for seniors in our County. “Westchester County has the third highest cost of living in the nation” Feiner said. “Our seniors are being forced out of their homes. They do not want to move from our communities.
They appreciate the services they receive here and want to stay near their families and familiar surroundings.” Medical professionals note that as mobility and sensory ability decline with age, seniors manage better in a familiar environment. Dementia, hearing loss, and other physical difficulties could make it impossible for an older person to adapt to a new environment. In 2007, Feiner proposed a program where seniors could work off a portion of their town property taxes by tutoring schoolchildren, doing legal or accounting work, or even working in the town parks for tax “credit”. When proposing this program, Feiner noted “There are many seniors who are having difficulties paying their property taxes, people on fixed incomes. This program could help them stay in the community. The town benefits, because we’re able to take advantage of the considerable talents of senior citizens.”
Feiner is also considering other options for seniors to control their property tax payments. “We should examine a way to let seniors pay taxes a little at a time, not in one large lump sum. And it’s diffi-cult for a senior to absorb a 10 percent annual increase in property taxes when their Social Security checks are only increasing 3 percent a year. So we should also examine a way to freeze the annual property tax increases that a senior has to absorb – possibly allowing them to pay the same amount of taxes each year and hold the increases in taxes against the equity in their homes so the tax increases are not due until their house is eventually sold”.
Feiner stressed that all local leaders have to look for options to enable seniors to stay in their homes. “Seniors do not have many options and assisted living is too expensive, so government has to look for options to make the communities more affordable. “We need to eliminate layers of local government and examine the feasibility of county government.” Feiner said. Even seniors at the upper end of the economic spectrum are concerned about the economy. Gemma Maver, the Director of Marketing and Community Relations for Kendal on Hudson, a continuing care retirement community in Sleepy Hollow, told The Guardian that their residents typically invest on Wall Street and are ‘holding tight’ as a result of downturns in their investments.
Residents of Kendal pay entry fees ranging from $187,523 for a studio apartment to $921,725 for a large two-bedroom suite with views of the Hudson River. “Our residents have already sold their homes so they do not have those concerns. But they do pay monthly fees to the community so we’re trying to keep those down despite increases in our energy and transportation costs.” Maver noted.
“We have a very informed, active community that is very energy conscious. We have a sustainability program to control our energy use and our residents support those efforts,” she said. But Maver has noticed some changes in the residents’ behavior. She explained, “Many of our residents drive but they are carpooling and taking advantage of our transportation to get to the train station or local appointments”.
After a lifetime of frugality and savings, some area seniors have amassed a considerable amount of money. These seniors, however, are more concerned with news of bank difficulties than with housing or the job market. Bob Stimpson, a local Branch Manager for Capitol One
Bank, noted that the biggest concern his customers express is whether their money is safe in the bank. “These customers remember
the effects of the ‘Crash of ‘29’ and the aftermath of World War II,” Stimpson noted. “We have customers who have placed their savings in trust for their children and grandchildren and may have more than the $100,000 maximum insured by the Federal Deposit Insurance
Corporation (FDIC). When they hear that the FDIC is watching over 90 banks carefully right now, they get scared”.
On July 18, the FDIC set new rules for banks to speed up payments in the event of a bank failure. The new rules were in reaction to the July 11 collapse of IndyMac Bank in California – the FDIC took over IndyMac Bankcorp Inc. and its $19 billion in deposits after the bank
failed to raise cash. The collapse of this bank has led customers of other banks to reduce their deposits below the $100,000 insured levels which in turn reduces the ability of those banks to make payments and offer credit, reducing the availability of cash even further. Senator Charles Shumer, a member of the Senate Banking Committee, voiced his concerns in June over IndyMac’s high level of mortgage defaults. This disclosure triggered a run on the bank by customers, resulting in the FDIC takeover.
Stimpson reassures local bank customers not to worry about their accounts, even if their savings are greater than $100,000. “There are ways to split up a customer’s bank balance to guarantee higher levels of FDIC insurance protection” Stimpson said. “Customers should be aware that their IRA accounts are insured up to $250,000. And any accounts held in trust are insured separately from their individual accounts. A
husband can have an account in trust for his wife and vice versa resulting in a combined $200,000 of insured accounts. By mixing and matching trust beneficiaries, a married couple with three children, both sets of parents alive, and two IRA’s , could have FDIC coverage up to
$1.7 million in total”.
Based on the Westchester County census in 2000, the County’s Planning Department projected that by 2010, approximately 184,000 local residents will be 60 years of age or older. The Planning Department expected that number to increase to over 200,000 by 2015. For the same period, however, the County expects the largest wage-earning group, ages 25 to 59, to decrease from 449,000 to 442,000, resulting in fewer wage-earners to cover the taxes needed to subsidize a growing elderly community. But while the current crop of seniors is facing severe economic difficulties, the upcoming groups of seniors could fare far worse. According to Stimpson “Our elderly customers remember the Great Depression and the lack of jobs greeting returning vets at the end of World War II.
They grew up having to economize. They are not impressed with name brands and will use an item until it falls apart. But our younger customers are in bigger trouble. For many of them, if they lose their paychecks it could mean losing their house in Scarsdale and having
to move to an apartment. Unlike their parents and grandparents, they don’t have the survival techniques to deal with a prolonged downturn in our economy.”
The Planning Department is updating its population projections to determine where the need will be greatest in the upcoming years. In the interim, those seniors struggling economically can contact the county’s Department of Seniors for assistance. In addition, each town and local municipality has a Department of Elder Americans and a Senior Center to aid local residents.