A recession will have a negative impact on seniors, according to executives at PolicyAppraisal.com, a consulting firm that appraises life insurance policies for the financial advisors of senior clients who are considering sale into the secondary market. The company recently reviewed the historical impact of the last recession in 2007 on seniors and other demographic groups and found that households headed by adults aged 55-64 experienced a decline in median wealth of about $72,000.
The company said it’s time for seniors to look for opportunities to hedge against the threats of a recession.
“Some of this is just simple arithmetic,” Wm. Scott Page, head of PolicyAppraisal.com, said. “Seniors had more wealth and therefore they had more to lose during the last recession. However, the numbers don't lie because seniors also have less time to catch up.”
Seniors have historically allowed large amounts of life insurance coverage to lapse in response to financial distress – policies that could have been appraised for potential sale instead.
PolicyAppraisal.com's Value Finder streamlines the appraisal process to provide a quick “yes” or “no” regarding the viability of a life settlement. Today, financial advisors are bogged down when trying to get simple answers from the traditional life settlement process.
The company reviewed several studies of the Great Recession and found that seniors are at higher risk because much of their wealth is held in stock market holdings and other savings which they’re using to generate current and future income. While younger adults have most of their wealth in their homes, seniors are more dependent on the market.
Additionally, the company also noted that about 30 percent of current money managers were not around during the last recession. Page is skeptical of whether the current crop of money managers, many under the age of 35, understand the implications of a recession and are adequately preparing their clients for a downturn.
“We’re sounding the alarm because we are already seeing the inflation crunch hit seniors, and a recession will be significantly worse,” he said. “Now’s the time for seniors to make a full review of their assets and their spending to have a complete understanding of how their current life insurance policy fits within their long-term goals.”