Seniors Face Grim Choices amid Market Shock

By Les Christie, CNNMoney.com

December 9, 2008

Many are delaying retirement, and even returning to work to cope with falling home values and deteriorating investments. Over half of senior citizens say they are either postponing retirement or planning to return to work due to the economic crisis, according to a survey released Tuesday by Golden Gateway Financial.

In a poll of 800 homeowners over the age of 65, 31% said that they are staying on the job longer due to their shrinking retirement funds, while another 22% plan to return to the workforce.

"Older Americans are aggressively searching for ways to gain control over and offset losses that might be near to impossible to recover in their lifetimes," said Eric Bachman, founder and CEO of Golden Gateway. "This is a generation that has seen and heard it all, and now we are asking them to find new answers to seemingly crippling situations."

But seniors looking for work may have a hard time landing a job. Employers this year are shedding jobs - more this year than at any other time since 1974. And older employees may not have the most up-to-date skills that companies are looking for. 

Like most Americans, the great majority of those over 65 are at least somewhat concerned over the state of their finances, according to the survey. And about 61% of those surveyed said that they are very concerned that markets may not recover enough to sustain their retirements.

"A lot of people target a certain amount of money for their retirement and if 30% of that disappears, they'll have to continue working," said Dean Baker, director of the Center for Economic and Policy Research.

The biggest challenge facing most retirees is a lack of time to offset their investment losses. "We have years to bounce back," said Bachman. "Seniors don't."

The fact that seniors are either staying in the workforce longer or returning to it is evident in employment statistics, which show a massive increase in workers over 65, even as employment for almost all other age groups has dropped. 

As of November, there were more than 6.15 million workers over 65, a 46% increase since November of 2000 and a year-over-year increase of a whopping 6%. Meanwhile, overall employment has dropped 1.7% during the past 12 months.

Finding cash

Seniors are also liquefying hard assets - usually their homes - to fund their retirements. About 80% of seniors own their own homes and 80% of those homeowners have paid off their mortgages in full, according to Bachman. 

About 12% of those surveyed said they are actively borrowing against the value of their homes to make up for market losses. Some are taking out home equity loans, but this kind of borrowing in retirement can be perilous. Seniors can find themselves unable to pay back these loans and wind up losing their homes.

Others are getting reverse mortgages, which let seniors take money out of their homes that doesn't have to be repaid until they die or the house is sold. Golden Gateway, which is a reverse mortgage broker, says that the number of reverse mortgages in October jumped 21% compared to last year. 

Another 13% of survey respondents said they're currently trying to sell their homes because they need the money, while 19% are worried about losing their homes altogether.

Some 16% said they would like to move but can't, and won't be able to do so for three years or more. In areas where foreclosures are common and home prices have collapsed, most homeowners don't sell these days unless they have to.

Seniors are also drumming up cash by selling their life insurance policies for more than their cash surrender values, according to Bachman, who adds that $13 billion worth of so-called 'life settlements' were sold in 2007.

And a majority of those surveyed - 54% - say that this the most severe economic crisis the nation has faced in their lifetimes, a notable statistic considering that some seniors were born before or during the Great Depression. 

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