According to a recent survey conducted by An Bord Bia into the spending habits of various age groups, the 18 to 24-year-olds and the 55-65 year olds are the two generations that are ‘less panicked’ than any other about the deepening recession.
That was until last week of course, when the great losses that older shareholders have experienced was fully exposed at the Allied Irish Bank EGM.
The biggest worry that older people have now regarding this recession isn’t so much getting a return on their money, but the return of their money.
Nevertheless, the young and the old share a number of traits: they (mostly) don’t pay huge rent or mortgages; the younger respondents’ overheads tend to be mostly discretionary once their education costs are accounted for.
The older generation is also mostly still living at home – a paid off home typically – and their overheads are lower than when they had 18-24 year olds sharing the premises. So good, so far.
Where attitudes towards their respective financial positions diverge, is how when you are 18 to 24 you tend to live in the present, not the future.
Your finances are usually irregular and ad hoc; you usually have little choice but to live within your means.
When you are 20, and (in your own mind) immortal, the accumulation and preservation of money doesn’t have the same sense of urgency as it does when you are in your 50s, 60s or 70s and it is intimately tied up in your own sense of health, wealth and security.
This heightened sense of financial security is a major issue for many over 50s and seniors right now.
Many do not see just the value of their private pension funds devalued by the economic and credit storm but also their savings, which are not only being assaulted by rapidly falling interest rates but higher – now 25% – DIRT tax.
Finally, their personal finances are also being impacted by higher taxes and the delivery of fewer services as the government frantically tries to repair its own balance sheet.
Anyone who has been relying on share dividends – especially from supposed blue chip shares like the Irish banks to boost their pension will have suffered losses in the region of 97 per cent.
Private pension funds or ARFs values are likely to have fallen by at least 30 to 40 per cent. Anyone with rental income may have had to cut it to keep their tenant; going forward, capital values may fall if property taxes are introduced.
The older person who has been mainly reliant on the state pension hasn’t been liable for the income levies and should still have their free medical.
But it’s an exaggeration to say that the slight fall in the price of food, clothing, furniture and energy makes up for the higher cost of transportation, other utilities and health services, or more importantly, the cutbacks in the delivery of these services.
So what should you do? Perhaps you should consider the following:
* Claim all existing tax reliefs and allowances (going back four years) and all your social welfare benefits. Your Citizen’s Information Centre can assist.
* Protect the security of your money as much as its value. They don’t pay the highest fixed or regular saving returns but two of the financial institutions with the safest risk profiles are PostBank (half owned by An Post and Fortis Luxembourg) and the only triple A-rated bank in Ireland, RaboDirect. Also, check out the Leeds and Nationwide UK-Ireland building society rates.
* If you haven’t retired yet, review your pension funds and other retirement assets. If you are within 10 years of retirement you shouldn’t be overly exposed to stocks and shares; consider ‘safer’ – a relative term these days, cash and bond funds for your retirement savings.
Younger investors – or those with genuine ‘spare’ cash should consider assets like oil and other energy shares, water resources, agriculture and precious and base metal commodities, arable land, food shares and forestry – effectively, resources with a tangible, lasting value.
Some advisors are recommending that a portion of large cash holdings be converted into gold and silver (see www.gold.ie).
* Raise immediate cash by renting a spare room in your home via the tax-free Rent-a-Room scheme. You can earn up to €10,000 a year tax-free from this scheme.
* Consider the savings you could achieve by renting your home out and moving to a cheaper country like Spain or Portugal or other Mediterranean EU country for all or if you have adult children with families of their own swapping your larger property for their smaller one. This will be a wise choice if property taxes are introduced based on rateable values.
* Investigate whether you might qualify for home equity release from Seniors Money or Bank of Ireland’s Lifeloan. Lower property values mean that there are more restrictions on the amounts that can be borrowed, but for many seniors, this may be the only way to secure a lump sum to boost their flagging incomes.
Jill Kerby welcomes reader’s letters. Please write to her via
The Munster Express,
37, The Quay, Waterford or via email at firstname.lastname@example.org