Tags: Mark Skousen | seniors | back | workforce

Skousen: Market Losses, Financial Uncertainty Push Seniors Back Into Workforce

Monday, 17 Jun 2013 12:57 PM

By Dan Weil and David Nelson

While the overall labor participation rate has slid in recent years, senior citizens are increasingly returning to the labor force, thanks to losses in their investment portfolios and financial uncertainty, says economist and author Mark Skousen.

The labor force participation rate for those 65 and older rose to 24.4 percent in May from 21.6 percent in June 2008, government statistics show.

"Retirees that used to be the idol class, if you will, are now the new working class," Skousen tells Newsmax TV in an exclusive interview. "They're continuing to work."

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He sees two reasons for that. First, "because their investments are not doing as well and the stock market is still struggling," says Skousen, producer of Freedom Fest and a columnist for the Franklin Prosperity Report, which is published by Newsmax.

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"Number two, there's a great deal of uncertainty. Do you really have enough money to retire on? Can you depend on your pension anymore now that it's a defined contribution plan?"

Years ago, most companies provided defined benefit retirement plans for their workers. Thus these workers knew how much money would be coming in each month during retirement. "So you were doing pretty well," says Skousen, who edits the investment newsletter Forecasts & Strategies.

"But now you have defined contribution plans, which are like IRAs, where you are in charge of the investment. So the senior has to suddenly become an investment expert, and it may be questionable whether you can really do that."

Now retirees are afraid they won't have enough money to live comfortably.

Social Security is another problem Skousen says. "Everybody knows that Social Security is running out of money, at least within the next 20 years, so there's this concern that benefits are going to be cut," he says.

Historically low interest rates also are hurting seniors, who have often depended on bonds, certificates of deposit and savings accounts for income, Skousen says.

"I speak at money shows all the time around the country, and my sessions are packed because I talk about dividend-paying stocks and alternative investments to CDs that don't pay hardly anything."

Annuity yields have declined too, Skousen notes. "Annuities used to be a great source of wealth, giving you a monthly income for the rest of your life," he says. "They used to pay 5 or 6 percent. Now they're paying 2 or 3 percent. So again, that's not enough money to live on."

All this is sending retirees to alternative investments for higher income, Skousen says. "They're taking greater risk in dividend-paying stocks, high yield bonds and so forth," he says.

"They've never heard of these alternative investments. It's a real learning curve for them to figure out, is this something I want to go to?"

Fortunately for seniors who do want to return to the workforce, the law has made it easier for them to find jobs than it was years ago, Skousen says.

"Since the 1990s, they have had this anti-discrimination law against aging people, so a lot of people who were forced out of retirement at age 65 can now continue to work indefinitely and many people are taking advantage of that situation."

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