Academic journal article Generations

The Economic Crisis: How Fare Older Americans?

Academic journal article Generations

The Economic Crisis: How Fare Older Americans?

Article excerpt

A situation that both challenges and draws upon the resilience of our nation.

The global economic crisis, the Great Recession, the financial meltdown, the worst recession since the Great Depression: All of these terms have been used over the past fifteen months, from the autumn of 2008 to late 2009, to describe the most recent troubled economic times. This economic crisis is calling into question assumptions about stewardship of the nation's financial resources, who we are as a people, how we work, why we save, and the role of government in our market economy.

Speculation abounds. Is the recession over, or is the worst still yet to come? Will the recovery be rapid (V-shaped), or slow (U-shaped), or are we at risk for a second downturn (W-shaped)? What should the role of the government be- are institutions truly "too big to fail" and in need of bailout money, or has the government overstepped and gotten involved in something that the market should have corrected? Is there too much stimulus spending, which will cause inflation in the future, or is more stimulus spending necessary?

Some see the crisis as having begun in September 2008, when Fannie Mae and Freddie Mac were taken over by the federal government, Lehman Brothers went bankrupt, the $700-billion bailout package failed to pass, and the Dow Jones Industrial fell 777 points (7 percent) in one day. Others see many triggers occurring long before that caused credit to freeze and the economy to crumble.

But in all these facts and figures are people and organizations that are trying to manage their way through this crisis. This issue of Generations explores the implications and opportunities emerging from this economic downturn as they apply to older Americans and to the readers of Generations. While not fully knowable, the implications are profound, and as was true in the 1930s, the present crisis also creates opportunity for innovation and change.

When the editorial board of Generations decided in November 2008 to develop an issue on the unfolding crisis, they asked the guest editors and authors to help "place the crisis in perspective," as best as could be, given that we would be writing as the crisis and- the new Obama Administration- were taking form. Recognizing the fluid nature of the situation, we asked authors to "think out loud," to speculate more than they ordinarily would in a more conventional issue. Recognizing, too, that people's lives are grounded in the changing realities of the economy, we also asked authors to give special attention to the human dimensions of the crisis for older Americans, people nearing retirement, and people delivering services to elders. And we made an effort to include stories of adjustment and resilience.

Implications

The implications of this economic crisis are broad and span the spectrum from economic to psychosocial to political. No individual, business, profession, or political organization is untouched; the impacts of the crisis have been sudden and many will have long-term effects.

Economic shocks

This recession has destabilized the finances of many retirees and people nearing retirement. Stock market and home equity losses have taken a large bite out of assets, with almost $3 trillion lost just from U.S. employees' 401(k) plans and IRAs between October 2007 and the end of 2008 (Fleck, 2008). Many individuals have stopped contributing to their retirement funds, while others are withdrawing money from their retirement accounts prematurely and incurring penalties (Brown, 2009).

Although some of those losses have been recovered, the impact of the market drop has served to highlight risks associated with the reconfiguration of retirement income. Over the past thirty years, the system has changed from one that relied on the employer and government to provide adequate income in retirement to one in which individuals are more responsible for their own financial destinies. …

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