Is the Fed Hurting Seniors?

Low interest rates hurt seniors, because they depend on earnings from their savings to fund retirement expenses. Last weekend, several pieces were published taking issue with that argument. They argued that the Fed’s low interest rate policies plus other government have helped seniors overall to the detriment of younger citizens.

It started with this article in The Wall Street Journal (subscription might be required) that used data from France and Spain to conclude that since the financial crisis older citizens have fared much better than older citizens. It also uses data from the U.S. to make the same point: Older citizens have fared better since the financial crisis than the rest of the population. This post gives four reasons why the Fed’s policies have favored seniors over the rest of the population and links to a longer article from Bloomberg.com making the same point.

Seniors in the U.S. have recently enjoyed healthier income gains—from government and private pensions, investments and, for those still working, salaries—than their younger counterparts, census data shows. In some countries, France and Spain among them, people 65 and older now earn more on average than younger people do.

The average person 65 and older in the U.S. earns 77% of the income of the average citizen, up from 69% in 2008, at the start of the recession. In the U.K. the figure is 89%, up from 78%. In Spain and France, seniors now earn about 103% and 102% of the average worker’s income, respectively, according to an analysis of data from the European Union’s official statistics agency. That’s up from 86% in Spain and 96% in France in 2008.