Nearly 60% of Americans Age 40 to 79 Have Experienced a Life Crisis Such as Job Loss, Divorce, Death of a Spouse or Major Illness or Disability
Women Significantly More Likely to be Affected Both Financially and Emotionally
AARP Financial Inc. President Says Understanding Emotions, Getting Expert Advice Are Critical to Successfully Managing Your Finances in a Life Crisis
AARP Financial Inc. Offers Life Crisis Action Plans and Phone Consultations with Specially-Trained Financial Advisors To Help Manage the Financial Impact of a Life Crisis
TEWKSBURY, Mass., March 31 /PRNewswire/ -- In times of life crisis, family finances may suffer significantly, as many households struggle to make the urgent and crucial financial decisions that are usually required, according to the results of a nationwide survey released by AARP Financial Inc.
More than half (57%) of the 1,200 adults surveyed said they had already experienced a major life crisis such as job loss, divorce, death of a spouse, or serious illness or disability of an immediate family member or themselves, and in the vast majority of cases, the event had a significant impact on their finances.
"The most important financial decisions we face are often precipitated by life crises," said Richard "Mac" Hisey, President of AARP Financial Inc., a taxable subsidiary of AARP. "But given the unpredictable nature of these events, these are often times when we may be distracted, emotionally overwrought and vulnerable. As a result, many of us may make poor decisions -- or take no action at all -- possibly putting our financial security at risk.
"Complicating matters is that it can be hard to find good information and trustworthy advice on financial decision-making in times of life crisis," Hisey added. "As the survey showed, the vast majority of Americans seek financial advice from families and friends -- who are well-intentioned but not necessarily financially well-informed."
Long-term Job Loss and Illness/Disability Have Greatest Impact on Finances
The survey found that long-term job loss and long-term disability or serious illness of you or your spouse were the events that wreaked the most havoc on family finances. Of those Americans who experienced long-term job loss, six in ten said that it had a very significant impact on their finances and 47% of respondents who experienced a serious illness or long-term disability echoed the same sentiment.
"The findings relative to long-term job loss are particularly troublesome, given the state of the economy," Hisey said. "Unfortunately, long-term job loss is one crisis that more and more Americans are likely to be experiencing."
"Perfect Storm of Personal Finance"
Beyond the angst many feel when dealing with financial matters, life crises can stir up additional emotional and psychological factors that complicate decision-making, such as denial, anger, and regret. Accordingly, over half of those surveyed (54%), said that it was hard to keep their emotions in check during a major life event and 42% said that it was at least somewhat difficult to stay focused.
"Life crises are the perfect storms of personal finance -- where the need for consequential and frequently urgent financial decisions meets an emotional hurricane," Hisey said. "Americans need help understanding that their financial decision-making at times of life crisis may be impacted by emotional and psychological factors."
"Even in the best of times, if money is involved, there are certain cognitive and emotional factors that can lead to decisions that are not in our best interests," said Warren Cormier, founder and President of Boston Research Group, and co-founder of the Behavioral Finance Forum, who consulted with AARP Financial Inc. on the study. "But life crises come with an additional layer of complications -- and, frequently, with a requirement to act."
It is hardly surprising then that when it came to their finances, "overwhelmed" was the most frequently cited emotion in instances of divorce (48%), death of a spouse (65%), serious illness/disability of self, a spouse or life partner (75%), or serious illness/disability of a child (79%). Fear of the future was the most frequently cited emotion in cases of long-term job loss (66%), followed closely by "overwhelmed" (57%).
Women Bear the Brunt
While nearly all adults will experience a life crisis at some point in their life, women tend to bear the brunt -- both financially and emotionally.
"No one escapes the financial implications of a life crisis, but they are particularly acute for women," said Hisey. "The demographic considerations are obvious: women outlive men, so they experience more life crises and deal with the consequences longer. But women also tend to be the caregivers. That means that women are frequently dealing with the human and logistical consequences of a life crisis, leaving little time and energy for the financial considerations."
Among those surveyed, women were significantly more likely to have experienced one of the life crises (65% vs. 49%). Typically, the financial impact is much more detrimental for women. Sixty-six percent of women who experienced long-term job loss in their household said it had a very significant impact on their finances (versus 49% of men) and 46% of women said death of a spouse had a very significant impact on their finances (versus 17% of men).
Women also reported that their emotional health suffered more as well. Fifty-four percent of women (vs. 32% of men) said that long-term job loss had a very significant impact on their emotional well-being and 58% of women (vs. 46% of men) said the same of a spouse or life partner's serious illness/long term disability.
"It's well known that the vast majority of women will be solely responsible for their finances one day," Hisey said. "Too often, women are assuming that responsibility at a time of tremendous personal duress."
Turning to Family and Friends for Financial Advice May Not Be Best Option
Asked where they turn to for help managing the financial implications of a life crisis, immediate family was the number one response, followed by friends or colleagues. The problem is that while family and friends may provide emotional support, they are not necessarily qualified to give financial advice. As evidence of this, 45% of those who had experienced a life crisis said it was hard to trust the financial information/guidance they were receiving.
On the other hand, while we rarely seek professional financial advice in times of life crises, those who did felt generally well served. Of respondents who sought professional advice in times of life crisis, 66% said they had a "very positive experience," and another 24% said they had a "somewhat positive experience."
"For the sake of the entire family, it's critical that the financial aspects of a life crisis be handled on a thoughtful and timely basis," Hisey said. "The death or serious illness or disability of a parent may have as much impact on the finances of an adult child as it has on the parent. We all know grown children who have had to dip into their own retirement savings to financially support a parent. Timely, expert advice can frequently make a real difference."
Creating Some Calm before the Storm-- Financial Preparation
Many Americans who have experienced a life crisis felt unprepared to manage the financial consequences. More than half (51%) of those who had experienced job loss said they were at least somewhat unprepared to deal with the financial consequences, as were 44% who experienced the very serious illness or disability of a child, 42% who experienced the very serious illness or disability of a spouse, 35% who had experienced divorce and, 27% who had lost a spouse or life partner.
"Let's face it -- it's hard enough to contemplate some of these scenarios, let alone plan for them," Hisey said. "While individuals and circumstances clearly vary, there are things people can do -- before, during and in the aftermath of a life crisis -- to give them more confidence and a greater sense of control, which is why we created Life Crisis Action Steps as an online resource (www.aarpfinancial.com/lifecrisis)."
Readers seeking assistance with managing a financial crisis can also contact one of our experienced, non-commissioned and specially trained Financial Advisors at 1-866-442-0368.
"Half the battle is getting the message out that Americans don't have go it alone," said Hisey. "AARP Financial Inc. was created to support AARP's mission of more financial security for all, which helps make us well suited to provide the resources to help you better understand the financial implications of a life crisis."
Note to Editors:
AARP Financial has created an online resource, at www.aarpfinancial.com/lifecrisis, which includes an overview of the issue, key research findings, tips on understanding the common emotions relative to life crises, and action steps to consider before, during and after experiencing a crisis. AARP Financial's experienced, non-commissioned and specially trained Financial Advisors are also available to help your readers or viewers who seek assistance preparing for or managing through the financial considerations of a life crisis. They can be reached at 1-866-442-0368.
About the Survey
The survey of 1,200 adults age 40-79 looked specifically at the financial impact of four major life events: death of a spouse, divorce, long-term job loss (more than six months) and the very serious illness or disability of self, a spouse/life partner or of a child. It was conducted by telephone from October 9 to November 8, 2008 by the Boston Research Group, a market research and consulting firm that specializes in financial services. The margin of error for the sample of 1,200 respondents is plus or minus 2.8 percentage points. The survey research findings were confirmed through a qualitative research component, one-on-one interviews conducted in February 2009.
Among survey respondents, 18% said that they or their spouse had experienced a job loss of six months or more, 29% had been divorced, 10% had lost a spouse, 24% said they or a spouse had endured a very serious illness or long-term disability, and 7% had experienced the very serious illness or disability of a child.
About AARP Financial Inc.
Founded in 2005, AARP Financial Inc. is a wholly owned taxable subsidiary of AARP.
AARP Financial Inc. is dedicated to helping people age 50 and over prepare for a more secure financial future by providing access to products and services designed to help meet their retirement needs and supporting them with clear information and guidance. Visit us at www.aarpfinancial.com for more information.
AARP Financial provides access to a carefully chosen array of investment products and guidance, including mutual funds from AARP Financial, designed to meet the needs of investors at any life stage; auto and home insurance through The Hartford; credit cards through Chase; life insurance and lifetime income annuities through New York Life; and mobile home and motorcycle insurance through Foremost. Please visit us at www.aarpfinancial.com for more information.
While AARP endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.
*AARP Financial Inc. does not provide legal or tax advice. Please consult an attorney or tax advisor for information pertaining to your particular situation.
AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. AARP does not endorse candidates for public office or make contributions to either political campaigns or candidates. We produce AARP The Magazine, the definitive voice for 50+ Americans and the world's largest-circulation magazine with over 33 million readers; AARP Bulletin, the go-to news source for AARP's 39 million members and Americans 50+; AARP Segunda Juventud, the only bilingual U.S. publication dedicated exclusively to the 50+ Hispanic community; and our website, AARP.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
|SOURCE AARP Financial Inc.|
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