Ripple Effect of the Economy on Caregivers and Elders


When it comes to the upcoming Presidential election, it's easy to assume that caregivers and seniors would be more concerned with health care reform and Medicare changes than with the economic stimulus and tax proposals of President Barack Obama and Governor Mitt Romney.

But, these seemingly isolated issues are actually intimately intertwined—which means that people caring for elderly relatives should be just as preoccupied with a candidate's plan to salvage the flailing national economy as they are with their stance on adjusting the minimum age for retirement.

John McDonough, President and CEO of Studemont Group, a fiduciary firm specializing in senior finances, says that the financial policies of the presidential candidates are likely to have little direct impact on the elderly. But, the "ripple effects" of these plans could turn into a tsunami of financial trouble for seniors and their caregivers because of their effect on retirement savings and government assistance programs like Social Security and Medicare.

"If taxes go up for everyone, people will have to pull more money out of their IRA and their savings to offset the increase in taxes. This puts an additional strain on not only the savings of the elderly, but on the stock market a whole," McDonough says.

This market strain can have a trickle-down effect—slowing overall economic growth, increasing the national deficit and decreasing the funds available for the entitlement programs that seniors (and many caregivers) depend upon.

Where the candidates stand on the economy

Both candidates remain cagey on many of the specifics of their financial proposals. Each has said that entrepreneurship and job creation are essential for economic development, but, according to an analysis by the Associated Press, both have differing opinions on how to achieve this expansion:

  • President Obama says he will stimulate the economy by implementing policies designed to expand and empower the middle class. He plans to do this by extending the Bush-era tax cuts for the middle class, while allowing the cuts for individuals who make more than $200,000 per year (or couples making $250,000 per year) to expire. He also plans on funneling funds and support into education, research innovation, and the development of clean energy sources.
  • Governor Romney promises to strive to inject the economy with policies designed to facilitate free enterprise, innovation, and hard work. He plans on investing in developing sustainable energy sources, and improving on the methods of extraction and production of current domestic energy sources. He also wants to reduce taxes by 20 percent for Americans in every income bracket, and is a proponent for reducing government regulation.

Feeding a nest egg in an unsteady market

Brian Feldman, former regional director for the Health Leadership Council and current senior partner at Allison & Partners, says that the country's recent economic woes have had a significant impact on the finances of not only seniors, but most adults who are approaching retirement age as well.

For years, American homeowners depended on their investments and the equity stored in their homes to be able to contribute substantial amounts of money to their nest eggs. However, the stock market crash of 2007 and the housing bust of 2008 have left many adults financially stranded.

Saideh Browne is one such adult.

A caregiver for her 91-year-old grandmother, Browne is a life-long saver who no longer knows when she'll be able to retire. Economic unpredictability has strained the 41-year-old life coach's finances to the breaking point.

"There are so many issues facing our future president, but without economic stability, the other issues don't really matter as much," she says, "For caregivers, our financial future is still uncertain."

Feldman feels that people in Browne's position will be forced to get creative when it comes to funding their future and the future of their elderly loved ones.

"People don't have what they had before the market crash," he says, "There's got to be a change in where the income is going to come from to fund retirement."

In an uncertain market, investors with a low risk tolerance (seniors generally fall into this group) may have trouble finding a ‘safe' harbor to dock their money in.

Senior programs in peril

Many seniors rely on government-sponsored programs such as Medicare and Social Security to help pay for their living and health care expenses. But, the future of these programs is practically as unreliable as the economy.

In economics, when you have more money going out than you have coming in, it means your enterprise is failing.

Unfortunately, that's exactly what's currently happening to Medicare, and what will likely happen to Social Security within the next four years. The future of these programs will be impacted by who is elected president, but experts say it's hard to determine who has the more effective plan for reform.

"I don't know if either candidate has the political power to stop what's going on with Social Security and Medicare now," McDonough says. The only way for these programs to get enough money to keep operating is if taxes are increased—something neither Romney nor Obama appear to be willing to do.

Feldman's view is more optimistic. He feels that things will calm down once the election is over, allowing for more rational discussions about how to keep entitlement programs solvent. "It seems as if both parties are living on different planets, but both understand that Medicare, Medicaid, and Social Security have some huge challenges coming up that need to be addressed," he says.

Different paths to economic recovery

McDonough's advice for November 6th: vote for the candidate you feel has the best plan to stimulate economic growth. More economic growth means elderly adults will pay less out-of-pocket for care.

So, which contender has a better plan for economic growth? It depends on who you ask.

According to Feldman, the growth of the middle class is what will facilitate an economic rebound—if the middle class grows, so too will the economy. He says the present focus on expanding the middle class is just what the national economy needs.

McDonough feels that neither candidate is truly poised to make the economy more "senior friendly." However, he says that Romney's proposals will likely be more friendly to small businesses which may help facilitate overall economic recovery.

No matter who sits in the Oval Office next January, it's clear that both current retirees and those approaching retirement age should be prepared for a good deal of uncertainty as policy discussions become less about attacking a political opponent and more about implementing real reform.

For her part, Browne just hopes that the next president will make fixing the economy a priority. "For caregivers, our financial future is still uncertain. Where will the money come from?" she says, "Without money, we can't do anything."

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Real economic progress will not take place until we as a society no longer accept poverty or immense wealth as acceptable. There shouldn't be a "middle class" but rather a universal quality of life that is the right of every individual.

Society should see to the needs of all members without such entities as health insurance firms eyeing their profits.

Is there a difference between the presidential candidates and their parties? Yes, definitely! But not so much when it comes to real economic (and health) reforms.
McDonough's advice is "More economic growth means elderly adults will pay less out-of-pocket for care.". How does this leap occur? Seems to me that, without adequately funded govt programs for the elderly, regulation of the insurance companies, etc. there will be no safety net for the eldelry middle class and poorer who have always barely scraped by and who would never be able to swim in any enonomy with their fixed incomes. There is money out there but it is being wasted or spent on things in all levels it shouldn't be, or protected via tax loopholes for the wealthy. I'm a little confused about that Romney tape where he is talking about the Chinese women who work in a factory ringed by barbed wire, "not to keep them from escaping, but to keep others from trying to break in to work there." . and it seemed like his point was, Americans are spoiled and not as hard working as these chinese modern day factory slaves are . And he bought a factory in China. So I don't buy that supporting business will solve everything, unless profit is the most important thing to Americans. I think it should be possible for a small business home health agency to exist that pays the workers who care for our family members a decent wage, allows them vacation time and sick leave and this can only be accomplished with government regulation and incentives and govt programs that help fund care for the elderly, instead of, for example, funding expensive travel junkets that all federal, state and local government staff are famous for using tax money for. I don't believe you have to sacrifice profits to treat workers decently in a society where government and business work together and the wealthy pay their fair share of taxes. And in my own neighborhood, I see the benefits of the current fed govt programs that are giving incentives for foreclosed homes to be bought for low interest with credits for fixing them up. This money is not coming from wealthy investors who keep their money is Swiss bank accounts but from taxpayer funded programs, like this one where the VA pays the salaries for vets to work for this company rehabilitating foreclosed homes.

What good does it to help small business and big make money when their employees can't afford to buy health insurance and end up as wards of the state when they need health care? Talk about creating a nation of victims.
Is this the Romney model for business in the U.S.?

Romney forgets that, unless you were born into a wealthy family like he was, in order to get ahead, you might need govt student aide, govt job training, govt protected rights to health care so you don't go bankruptcy for a medical emergency .