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Worry Nationally, Don’t Overreact Locally

Most Older Consumers Stay Calm About Finances

The majority of consumers over age 45 lost money in the stock market in recent months and fear the economic slowdown may worsen, but most aren’t taking drastic action with their stock investments, according to a recent survey by AARP.

In April the nonprofit organization formerly known as the American Association of Retired Persons surveyed middle-aged and older consumers about the economic slump’s effect on their spending and investing activities over the previous 12 months. The survey reveals that 81 percent of respondents believe the economy is in bad or fairly bad condition. Three-fourths believe conditions are going to worsen before they improve.
Sixty-three percent of respondents own stocks individually or through mutual funds, IRAs or a 401(k). Of this group, 72 percent report a financial loss in their investment accounts over the previous 12 months. Among the survey participants who are retired, 26 percent had an overall decline in retirement income in the previous 12 months because of falling interest rates.
Despite heightened concern about their finances and a deceleration in saving money for the future, the majority of respondents aren’t making major changes in their investing portfolios, nor are they panicking about declining home values, the survey suggests. But one-third of them have stopped putting money into retirement accounts because of the economic slump, while 23 percent say they prematurely withdrew funds from a 401(k), IRA or other account.
About one-third of the respondents also changed the types of stocks they were invested in during the previous 12 months because of market losses. This trend is most pronounced among older Americans: Almost half of respondents age 65 and up changed stock types, compared with only 36 percent of those age 55 to 64 and 27 percent who are between 45 and 54.
Most respondents are worried about the effect of the real estate crisis on the economy. Eighty-nine percent are concerned that widespread mortgage foreclosures will dampen the economy as a whole, and more than half are worried about the indirect consequences of foreclosures on stock prices.
Although 64 percent of those polled are troubled about the effect of foreclosures on their neighborhood or community, 58 percent of them aren’t concerned about the impact on their own finances. Just 2 percent of respondents had experienced a foreclosure in the previous 12 months.
Woelfel Research conducted the survey for AARP by telephone from April 12 to April 23 among a nationally representative sample of 1,003 adults age 45 and older. The margin for error is plus or minus 3.1 percent.

Kate Fitzgerald is a free-lance writer based in Scottsdale, Ariz., specializing in business and technology.

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