Between October 2007 and November 2008, the Dow Jones Industrial Average lost more than 40% of its value, and investors suffered losses totaling more than $50 trillion around the world. According to an AARP report published in December 2008, "the current economic downturn is likely to be the worst since World War II." Its consequences for older Americans could be catastrophic."

The Population Reference Bureau (PRB), using data from the American Life Panel (ALP), Health and Retirement Study (HRS), and other sources, stated in a March 2010 report that "mounting evidence indicates that the recession has erased decades of improvements in material well-being for the most vulnerable groups" (children, the elderly, and the poor) during the Great Recession.

Take, for example, the following conclusion from a PRB report published in November 2015: "The Great Recession (2007 to 2009) had widespread economic consequences for Americans of all ages, but older people were relatively insulated from the prolonged economic downturn."

This discrepancy necessitates an investigation into what impact the crisis had on seniors and why it did so.

Variations Among a Demographic Group

AARP's report made it abundantly clear that there is no such thing as a single financial reality that applies to everyone in the senior population. Due in part to the fact that a small percentage of the elderly population had employment in the first place, it was anticipated that fewer older people would lose their positions during this recession.

Those who did find themselves out of work were expected to suffer severely as a result of their situation. Participants in defined-benefit plans were generally considered to be in a better position than those participating in defined-contribution plans, though there was genuine concern that some defined-benefit plans would be frozen or fail.

People who had to supplement their Social Security benefits with 401(k) or IRA funds were expected to be among those who would be most adversely affected. Some savers who had not yet moved their money out of equities and into bonds had already suffered significant losses. Seniors who had not reached the age of eligibility for Medicare were at risk of losing their health insurance coverage. People who owned their homes outright were expected to fare better than those who still owed mortgages, particularly those who had mortgages that were underwater at the time of the recession.

The Crisis Has Come to an End

According to a PRB survey conducted in 2010, more than 70% of individuals aged 40 and older believed that the recession had an impact on them. When asked about their experiences between November 2008 and January 2010, approximately 30% of those households stated that they were more than two months behind on their mortgage, had negative home equity, were in foreclosure, or were unemployed.

During this time period, older citizens (along with all other demographic groups) spent less, saved less, and reduced their use of medical care. More than 55 percent of workers between the ages of 50 and 64 expected to be working full time when they reached the age of 65 in order to reduce retirement savings losses. Between November 2007 and August 2009, the number of seniors who were out of work increased by more than 50%.

Impact on Financial Well-Being

Although unemployment has increased, home values have decreased, and retirement savings accounts have declined in general, poverty rates for those who are eligible for Social Security benefits have remained stable, according to the 2015 PRB report. Older people had more assets to lose than younger people.

From 2007 to 2011, the median net worth of adults aged 65 and older decreased by $64,0121, compared to $72,380 for those aged 55 to 64, $60,295 for those aged 35 to 54, and $2,094 for those under the age of 35, respectively.

Older adults, on the other hand, saw their net worth decline by a smaller percentage during this period, with those 65 and older seeing their net worth decline by only 25 percent, those 55 to 64 experiencing a 33 percent decline, and those between 35 and 54 experiencing a 61 percent decline.

After all was said and done, the recession had a minimal impact on the wealth of older adults. Between 2006 and 2012, when the future value of Social Security and defined-benefit pensions were taken into account, Baby Boomers in their 50s experienced a 3.6 percent decline in wealth.

By 2012, older adults had regained the majority of the wealth that had been lost during the Great Recession as a whole.

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However, how they responded to the initial declines would determine whether or not they were successful. According to Fidelity, as of June 2017, people who stayed invested from 2007 on saw an average growth of approximately 240 percent, whereas those who sold their stocks in 2008 or early 2009 and jumped back into the market later saw only a 157 percent increase in their investment portfolio.

The effect on home values and consumer spending

By 2010, 15 percent of homeowners under the age of 50 were underwater on their mortgage payments. While negative equity was present in only 7 percent of homes owned by people aged 50 to 64, it was present in only 4 percent of mortgages owned by people aged 65 and older.

During the financial crisis, Americans saw their home equity plummet by trillions of dollars. Although older residents were largely spared the worst immediate consequences of this loss, unless they were attempting to sell their homes during that time, this was largely due to low mortgage balances or mortgages that had been paid off prior to the start of the recession.

That does not imply that they were unharmed. During the Great Recession, 33 percent of people aged 55 to 64 cut back on their spending, which included cutting back on healthcare, food, and other expenses, among others. Only 17 percent of those aged 75 and older reduced their spending, in contrast to the general population. In fact, older seniors were more likely than younger seniors to increase their spending, indicating that they were somewhat financially secure.

Some older Americans who did make cuts spent their time (cooking at home) rather than their money (eating out). One aspect of spending that did emerge was the belief among older adults that they would have less money to pass on to their children—approximately 20% less, according to one study—if they died before their children were born.

Employment and retirement outcomes are affected.

Despite the fact that unemployment rose dramatically during the recession, many Baby Boomers were able to keep their jobs, which helped to moderate the overall numbers. While the recession was occurring and immediately following it, the average age of the workforce increased. According to Gallup, the number of Americans aged 65 and older who are still working increased by 2.2 percent between 2010 and 2013, while the number of workers aged 18 to 29 decreased by 2.7 percent during the same period period.

The reason for the increase in older workers was most likely due to seniors who chose to remain in the workforce or re-entered it in order to rebuild their retirement savings after retiring. Other considerations included the need to provide financial assistance to younger family members who had lost their jobs or homes.

Seniors nearing retirement age at the end of the recession who chose to remain in the workforce did so for an average of an additional four years after they were eligible to do so. The percentage of wealth that was lost as a result of the recession did not appear to be a consideration. For several years prior to the recession, older workers had been staying in the workforce for longer periods of time.

Health Consequences

Economic well-being and physical well-being are intertwined. The recession caused some older people to put off doctor visits, reduce their medication intake, and experience increased stress. Stress is itself a risk factor for heart disease and other diseases. According to one study, people between the ages of 45 and 66 who lose their jobs during a recession have a higher risk of dying than those who lose their jobs during a non-recessionary period.

The Bankruptcy Factor is a financial factor that influences a company's ability to file for bankruptcy.

According to the Institute for Financial Literacy (IFL), people aged 55 and older filed for bankruptcy in 2006, accounting for 21.8 percent of all bankruptcies. By 2009, it had increased to 25 percent. Historically, medical debt has been the most common reason for older people to file for bankruptcy.

Aspects of the financial crisis included loss of income, unemployment, and depletion of retirement savings accounts, among others. Despite the fact that the rate of bankruptcy among those 65 and older has increased fivefold since 1991, a recent study found that the rate of bankruptcy among those 65 and older has increased fivefold since 1991.

Not everything that has happened can be attributed to the Great Recession. According to research, a 30-year shift in financial risk from the government and employers to individuals—primarily as a result of the replacement of defined-benefit pension plans with defined-contribution plans, such as 401(k)s—is a significant contributor to the problem, as is an increase in out-of-pocket healthcare spending.

What's the bottom line?

There are approximately 52.4 million Americans over the age of 65,14 and they were all affected by the Great Recession. Despite the fact that no two stories are alike, there are some common themes:

Although the majority of people saw a decrease in the value of their retirement savings and home values, most had recovered nearly all of their losses by 2012.
Spending reductions were modest, with older seniors actually spending more than younger people.
The amount of wealth lost had little impact on whether or not people chose to stay in the workforce or when they chose to retire.

As a result of the tendency to cut back on doctor visits and medication during economic downturns, it appears that health does take a hit during these times. As a result, according to the most recent data available, 97 percent of people aged 75 and older reported having a regular place to go for medical care, and only 3 percent of people aged 65 and older reported having been unable to obtain necessary medical care during the previous 12 months due to financial constraints.

Although bankruptcy rates among seniors have increased since the financial crisis, it is possible that this is due to an increase in the amount of financial risk taken on by individuals rather than to the recession.

According to conservative estimates, nearly one in every ten people aged 65 and older (8.9 percent or 5.1 million) lived below the federal poverty line in 2019.

16 Many of the remaining 90 percent will die with more wealth than they did when they first retired from the workforce, according to estimates. Apart from that, the real median income (after adjusting for inflation) of all households headed by older people grew by 3.3 percent between 2017 and 2018. In 2019, 10.7 million (or 20.2 percent) of the population over the age of 65 were employed in the United States.