Staying the Course: Aging Succesfully in the Face of Financial Obstacles

Joe Casciani, PhD

November 30, 2020

We have known from the outset of this COVID-19 pandemic that older adults have experienced a disproportional impact on their health, whether in the form of infection rates, hospitalizations, and death. However, another serious effect of this pandemic has been facing financial obstacles. Namely, the loss of income and health insurance, and unemployment. The Commonwealth Fund, in an article about COVID-19’s impact on older workers, about 11% of ages 65+, or about 1.1 million people, have lost their jobs, representing about 13% of the older adult workforce. Even higher rates are found in workers of Asian descent (19%) and Hispanic heritage (also 19%), while furloughed employees approaches 30% for those who worked in the leisure and hospitality industries. As is highlighted below, one of the major hits is the loss of health employer-paid health insurance, forcing many older adults into Medicare or a related plan, with new, unexpected insurance premiums.

In this article, we first discuss the concept of reliance. Then, we take a close look at the unique financial stresses that are frequently experienced by older adults pre-COVID, putting seniors in uncomfortably vulnerable positions. The article then addresses the reasons why some seniors have an especially difficult time managing their own financial situations. Lastly, strategies for overcoming financial setbacks are highlighted. 

What is Resilience and What Does It Look Like in Older Adults?

Much has been written about this topic. The American Psychological Association (“APA”)defines it as the process of adapting well in the face of adversity, trauma, tragedy, threats, or significant sources of stress, i.e., bouncing back from difficult experiences. With patients, I often used the analogy of being able to get up off the mat after getting knocked down, often more than once. Where does resilience come from? The APA suggests that people have the capacity to build and show resilience regardless of their socioeconomic background, personal experience, or social environment. It is associated with successful aging and longevity, social engagement, and reduced levels of depression. The APA article referenced presents a particularly thorough description of resilience scales and personal traits associated with this characteristic.

Although there is not much scientific evidence showing how resilience can be taught or strengthened, we know definitively that older adults can make use of their adaptability and fighting spirit. This helps to face mental, social, physical, and likely financial stressors in their lives. This article puts a spotlight on how financial setbacks are experienced in older adults and sheds some light on recovery strategies.

Financial Stresses Often Associated with Aging

Everyone faces money problems from time to time. Whether it is credit card debt, spending beyond one’s financial means, job loss, staggering medical bills, or other unusual and unexpected costs, managing income to expenses can be a challenge. For the elderly, however, there may be additional, age-related problems surrounding money management:

• Healthcare costs, typically greater for seniors than the average middle-aged adult, intrinsically create financial stress for the elderly. These costs include doctor’s visits, prescription drugs, tests, and hospital stays. Increased incidence of chronic health conditions, such as heart disease, obesity, and osteoporosis, as well as various mental and psychological problems, frequently cause increased worry and stress.
• Living on a fixed income can trigger unique challenges when hit with an unexpected expense, such as a major repair bill for the home or auto, or medical bill.
• The prospect of transitioning to a long term care setting, assisted living or residential setting – especially unexpectedly –  can present a daunting stressor for the average older adult.
• The financial savings cushion of many older adults was hammered by the recession just a dozen years ago. Many seniors saw their net worth decline following the 2007 recession. According to research by the Pew Charitable Trusts, many Baby Boomers lost 25% or more of their net worth.
• Financial fraud is most common among seniors, as they are easier targets. This contributes to actual losses, and extraordinary amounts of worry even when it does not occur.
• Low interest rates on savings and certificates of deposit for those relying on fixed-income investments adds another level of risk for the average senior.
• A surprising stressor for Baby Boomers is the amount of student loan debt for loans co-signed for their children or grand-children. According to an article on Finances Online, about 2.2 million Americans aged 60+ have co-signed loans and this age group still remains the fastest-growing age group for student loans. Further, Pew Research has found that 40% of older adults took on more debt by helping their adult children pay their bills.

Of course, there are mitigating factors like supportive family, accumulated wealth and savings, a secure residence or retirement setting, and steady post-retirement income can all take the edge off.

Why Seniors May be Especially Vulnerable to Difficulties Managing Their Money?

Financial skills are often the earliest to show signs of decline in dementing conditions. This is especially troublesome when considering that the older adult population owns a disproportionate amount of the wealth in the US. According to an article in the New York Times describing the warning signs of financial decline, seniors frequently have problems managing finances and there is a lack of a plan to manage decline in financial abilities. See As Cognition Slips, Financial Skills are the First to Go. The warning signs of limited cognitive functioning in the area of money management:

1. Taking longer to complete everyday financial tasks – e.g., check register, preparing bills for mail
2. Reduced attention to details in financial documents – e.g., identifying an overdue bill
3. Decline in everyday math skills – e.g., calculating restaurant tips
4. Decreased understanding of financial concepts e.g., medical deductibles, minimum balance
5. Difficulty identifying risks in financial decision-making or investments – e.g., understanding the risk of telephone fraud, or increased vulnerability to financial exploitation

In an article in Better Health While Aging, Leslie Kernisan, MD, MPH highlighted some of the salient issues involved in evaluating problems with finances. As we all know, declines in financial ability make the senior adult more vulnerable to financial exploitation and abuse by unscrupulous family and friends. There are also scammers and strangers to be wary of. Second, Dr. Kernisan reminds us that difficulty with financial management can occur in the absence of a condition like dementia. Normal age-related changes may sometimes include changes that make managing finances harder. Of course, reduced cognitive functions that accompany dementia usually include difficulty with financial decisions in the early stages. And she maintains, when there is difficulty with financial management, there are probably other, less obvious signs of decline such as limited self-care functions to be on the lookout for.

Overcoming Financial Setbacks

Financial setbacks are inevitable. Loss of a job, whether voluntarily or involuntarily, medical emergencies, serious home damage by a deadly storm, natural disaster, or fire, or any similar traumatic events can come into play. These life-changing events are not uncommon. According to the National Endowment for Financial Education, 96% of Americans experience four or more major life events by age 70 that cause their incomes to drop 10% or more. And six in 10 workers go a full year without earnings at least once. And during this unprecedented 2020 year of the COVID-19 pandemic, more seniors than ever have experienced job layoffs. So, what are the strategies for recovering from these setbacks? What can we do to rebound, to use our resilience to overcome the losses? An article in Forbes outlined several survival strategies:

• Contain the pain: do not catastrophize. Imagining the worst that can happen is not helpful, and is actually counter-productive. Instead, focus on immediate, problem-solving solutions by identifying the steps to ensure that bills can be paid. In a recent Living to 100 Club podcast with Ric Edelman, noted financial authority, recommended in the most desperate situations to focus on food and medications. Other bills can wait, at least while here in the U.S. The federal government and many states and local municipalities, have imposed restrictions on forced home and apartment evictions. Create a checklist of urgent tasks and put everything else on hold. This may include contacting Social Security, a spouse’s former employer, insurance agents, and so on. For steps to take after a natural disaster, HERE is a useful guide from Take Charge America.  

Cut Yourself Some Slack

• Cut yourself some slack: self-blame is a common response to financial fallout. As the author of the Forbes article said, “Financial shocks happen a lot, and not just to you.” Beating our self up for not doing more in the past is not helpful. We cannot change what happened in the past; we can only change our perception or view of the past event. In addition, this strategy includes being willing and able to ask for help, especially from credit card companies or lenders.
• Enter the decision-free zone: In the midst of these dire financial straits, making big decisions is discouraged. In those more favorable conditions when there is an insurance settlement or severance package, avoid investments or big-ticket decisions. This stress usually diminishes our ability to make sound financial decisions. This also includes taking advice from friends and family, despite their good intentions. A simple Thank you and a comment like their Advice is under consideration, or I’m not ready to make a decision yet will suffice.
• Reclaim what brings you joy: Resizing your spending ability under these new circumstances of financial strain is necessary. But there is also the need to attend to those small indulgences and allowing some expenditures that bring us joy. The pain and discomfort may be around for awhile but avoid the need to cut pleasure spending entirely. As our priorities often get realigned after a serious financial setback, we often get more in touch with what really matters. Even the small things bring new meaning and joy.

Summary and Closing

For many seniors, resilience and adapting to financial obstacles will include several steps. These recommendations are based on years of professional experience and understanding of age-related changes. Material is also culled from research on COVID-19 and financial obstacles in the elderly. Steps to consider:

• Avoid the temptation to catastrophize from setbacks or imagine the worst. Instead, focus on differentiating between what we can control and what we cannot control. Our attitude, outlook, actions, and reactions are under our control. External events, other people’s actions and what others think are usually not.
• Adopt a problem-focused coping style rather emotion-focused coping. The practice of identifying and tackling specific solutions takes precedence over emotions like helplessness, depression, or despair. These emotions are real, and must be acknowledged and respected, but they do not have to control us.
• Pay attention to the positives in our lives, rather than dwelling on the negative developments and disappointments. We likely have both good and bad in our lives. But relying on our strengths, motivation, and determination will keep moving us toward our goals and objectives. Pay attention to the positives.
• Dig deep and look inward for your reservoir of energy. Find that creative spirit to accomplish what we did not think we were capable of. Resilience is in all of us. With each step forward, we create momentum and more confidence to push through setbacks and get over the hurdles.
• Avoid self-recrimination and fault-finding over past actions. We cannot change what was done or what happened in the past. Only our attitude and perception of past events can be changed. Remember that when you made a decision in the past that you now disagree with or find fault with, at the time, it was right for you. It likely seemed like the best course of action. Perhaps today you would do something different under the same circumstances. But there are no do-overs. All we can change is our attitude toward what we said, or did, or decided, accept it and move on.
• Allow yourself to rely on others for assistance. There are many resources available (see below) to assist with financial setbacks. Remember that accepting help can be the most respectful, self-affirming thing we can do for oneself.
• Be prepared to start a new life chapter when necessary. Whatever the loss, allow time to grieve and heal as needed. And when you are ready, be open to a new positive future. Do not let yourself be defined by who you were yesterday. Create your own new role and write your own script.

Many people are experiencing severe struggles during this pandemic, and older adults are not exempted. In fact, this age group may be taking the brunt of the damage from this scourge. Please know you are not forgotten. Seek out resources that are available, like AARP, the National Council on Aging, the Consumer Financial Protection Bureau. Also, there is the National Resource Center for Engaging Older Adults. Most important, our drive and motivation will get us beyond any obstacle. Whether through, over, under, or around it, we can get beyond it.

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Be sure to visit the author’s website, www.Livingto100.Club, for a collection of blogs, podcast recordings, and details about becoming a Club Member. Also, be sure to download a copy of his “9 Tips for Creating a Positive Frame of Mind as We Age,” www.livingto100.club/9tips. His latest book, Living Longer IS the New Normal, is available on Amazon.