One of the hardest hit groups when there is a downturn in the economy is retirees. Most people retire with a nest egg that they have sacrificed for years in order to accumulate, and if that nest egg has been invested in stocks or even bonds over the past year, most retirees have good reason to worry. A 64 year old retiree that had a million dollars in a mixture of stocks and bonds a year ago might have as little as $600,000 now, and living for the next 30 years on that is a much more difficult prospect than when the retiree had a $1 million reserve.

The reality is that there are millions of senior citizens in this country that are not sitting on a nest egg of any kind. They are on a fixed income and rely on Social Security for the bulk of their financial needs.

Two rules are in place now as a result of recent financial circumstances in the US that are good news for seniors. First, the Social Security Cost Of Living Adjustments (COLA) for this year were much higher than usual. And second, seniors are not required to take Required Minimum Distributions (RMD’s) from their IRA’s this year, which will save money on taxes.

COLA Increases: During the early part of 2008, with astronomical gas prices leading to higher food prices and worries about inflation, the Social Security Administration instituted a 5.8% cost of living adjustment for this year. If you are 70 years old and withdrawing that maximum available amount each month, this means an extra $84 each month. Not a huge difference on a small scale, but over the next 25 years, the difference will be over $35,000 in all.

RMD’s: Normally people over age 70 are required to take a certain amount out of IRA’s each year-Uncle Sam wants to begin collecting on those funds that have not yet been taxed. This year, no one will be forced to take a withdrawal. This will mean a lower tax bill for retirees and will also allow them to leave funds invested in hopes of a recovery instead of forcing stock sales when values are so low.

Neither of these two benefits will mean a dramatic change in the daily financial lives of retirees. However, both changes will make a long term difference in giving seniors a better chance to make their money last as long as they do.

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Tags: retirees, retirement, senior citizens, social security

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