State of mind: What's really in the balance?
The focus on bank balances and possible deterioration in living standards of older Australians as a result of the global financial crisis (GFC) could be masking broader, longterm health issues, including anxiety and depression.
For most people, the financial impact of the crisis can be measured in their reduced retirement savings and shrinking pension payments in the wake of the unprecedented 21.5 per cent drop in equity markets in 2008.
The shockwaves of the GFC and the sovereign debt crisis are still being felt as investment managers struggle to make up the losses suffered by individuals. However, it is not only people's bank balances and lifestyles that are of concern. Many people are feeling more anxious and depressed about their financial situation than they were when the financial crisis was really biting in Australia from April to September 2009.
"The general expectation is that, now that the worst of the GFC is over, people's lives should be back to normal and they should be feeling better about retirement, but that is not the case," says Kerry Sargent-Cox, a fellow of the Australian School of Business-run ARC Centre of Excellence in Population Ageing Research (CEPAR).
Sargent-Cox, together with Peter Butterworth and Kaarin Anstey of CRAHW, recently completed a longitudinal study, The Global Financial Crisis and Psychological Health in a Sample of Australian Older Adults.
This study investigated the effects of the GFC on mental and physical health by comparing self reported symptoms before and during the financial crisis for older adults who are retired or near retirement. There was a significant increase in depression and anxiety symptoms during the GFC that was not explained by demographic or socioeconomic factors such as an increase in financial hardship over time.
The results also indicated a timing effect, where, compared to the period from April to September 2009, when the financial crisis was at its most turbulent, those participants who were interviewed post-GFC, from October 2009 to May 2010, were more likely to report higher depression symptoms.
Sargent-Cox believes that what is known in psychologists' circles as 'the protective effects of social norms', had a big role to play in how older Australians felt during and after the GFC. "In the GFC there was a great expectation that everyone was suffering," she says. "The protective effect of that on an individual is that they are suffering along with everyone else and so they are not that badly off." Anxiety levels and depression symptoms at that time were not too different among the individuals surveyed than they had been before the GFC.
It was after the worst of the GFC had supposedly passed – generally measured by the 'shock-horror' news headlines – that people began to feel anxious and worried about their future. "A person still feeling the effects of the GFC when things were supposed to be better no longer feels protected by the social norm. It is then that the feeling of anxiety and depressive symptoms started to show," says Sargent-Cox.
The loss of great expectations
The researchers had the benefit of data collected as part of the Personality & Total Health (PATH) Through Life project, a large longitudinal cohort study that ran before, during and after the GFC. The focus of the researchers' investigation was on individuals with a mean age of about 66.
Sargent-Cox says the research findings were consistent with the psychological literature that shows that both discrete and enduring life events can increase the risk of adverse health outcomes. The health effects of the GFC on the so-called baby boomer generation (generally defined as those born between 1946 and 1964) is made even more interesting because of the proposed self-funded nature of their retirement. "It is very important to these people that they have the money there to retire on," she says. "The baby boomer generation has expectations of a high standard of living and there would be nothing worse than to think they couldn't maintain that standard."
While people in an excellent state of health may have been able to delay their retirement plans or even return to the workforce, others would be stuck in a situation of financial hardship because of their health, Sargent-Cox points out.
Social demographer and principal of "McCrindle Research, Mark McCrindle, says the stress of no longer having the retirement they planned was particularly pertinent to baby boomers. "This is a generation who played by the rules. They worked hard, played hard, payed off the mortgage and saved for their retirement knowing they could comfortably quit work at 60 or 65," says McCrindle. "They paid their taxes so even if they hadn't saved enough they thought they could rely on the public services provisions in the form of an aged pension in their retirement years."
All of a sudden their superannuation got hammered and there has been talk of changes to the way the pension is means tested. "This all adds to the stress and mental health of this cohort," says McCrindle. Fortunately it is also the can do generation and they will do their best to readjust, he says.
Michael O'Neill, chief executive of the not-for-profit group National Seniors Australia, is also expecting an element of readjustment and rethinking to get those affected by the financial crisis through a tough time.
Governments' focus on the broader economic impact means older Australians have generally been left to get on with the rest of their lives as best as they can, O'Neill says. For some people that meant either delaying retirement or returning to work. "It is always unfortunate that we focus on the immediate impact of the dollar," says O'Neill. "It tends to be the case across society [but] the concern is that we fail to properly recognise and provide the necessary responses beyond the financial consequences."
While O'Neill acknowledges work is being done in the resource stretched area of mental health, the focus on older Australians is generally less than in other age cohorts, he says. "There is some work being done in the area of depression, but older Australians have not been a high priority area. Mental health generally is a problem and funding is an ongoing issue," notes O'Neill. The stoicism of the older generation generally means people are left to "suck it up and get on with it".
Working it out
O'Neill says his organsiation's focus for senior Australians in a post-GFC world is to ensure the pension drawdown relief announced by the government would continue. In 2009, the government reduced required annual pension drawdown amounts for those with account-based pensions and annuities by 50 per cent. It legislated a lesser 25 per cent reduction in 2011, which has recently been extended to the 2012-13 financial year. Under this measure, eligible pensioners only have to take 75 per cent of the standard minimum pension drawdown instead of 100 per cent. "The idea behind the initiative is to give eligible pensioners the option of preserving more of their pension account balance in super, rather than drawing on their pension income and potentially realising losses in the current investment climate," explains O'Neill. "It provides a bit of breathing space for those people dependent on a pension for income."
National Seniors Australia also remains concerned that older people have the opportunity to return to work if required. A research report titled The Elephant in the Room, conducted for the organisation by the late Professor Sol Encel, an honorary research associate of the Social Policy Research Centre at UNSW, revealed that age discrimination is alive and well in the workplace.
O'Neill says the 2004 federal age discrimination laws aimed at helping workers have, in part, made it more difficult. "With the age discrimination laws in place, employers are now much more sophisticated in how they exclude older workers," he says. "For example, they may use recruitment agencies to screen applicants, employ code terms such as ‘overqualified' or frame advertisements denoting youth."
The costs to the nation are huge, according to O'Neill, who highlights mental health issues as a looming problem along with financial hardship. "In a human sense we're creating an underclass more likely to experience social isolation, ill health and financial insecurity," he says. "In monetary terms, not employing these people who want to work translates into a A$10.8 billion annual loss to the economy."
Despite their determination, O'Neill says it takes over 50s three times longer to get back into the workforce. After years of trying, if they're below 65 many will end up on a disability pension, he says.
It is a sobering thought for the millions of retiring Australians whose dream has long been to retire comfortably and in good health to do the things they've always wanted.