We have heard a lot about the high unemployment rates in the U.S., California and the Central Coast that has impacted most businesses in our area. But how are senior citizens faring during these times?
With retirees comprising 40 percent of Cambria’s population, many are dependent on fixed income investments to supplement their pension and social security checks. Many senior citizens have seen a significant drop in Certificate of Deposit (CD) rates over the last four years.
Charles Schwab reports that in Feb 2006, the average yield on a one-year CD was 5.4 percent; today’s average rate for an equivalent CD is 1.3 percent. Even with a low inflation rate, this rate difference represents an annual loss of $1,025 of income per year on a $25,000 CD — that equates to $85 per month. Treasury and money market rates have followed a similar reduction.
So what are our seniors doing to cope with this situation? Some have cut back on their discretionary spending by deferring vacation travel or by not going out to eat as much. Others are being forced to move out of Cambria because their financial investment portfolio in equities (stocks) has deteriorated due to the two economic downturns that we have experienced during the last 10 years.
There are several ways in which one can cut back on expenses while maintaining the same service. Many residents who live outside of Cambria are now using their cell phones to replace land lines phones. With minimal cell service in Cambria, many of us use land-line service like AT&T. Locals who maintain a land line with AT&T can reduce their expenses by close to $20 each month as follows:
(1) Since virtually every call outside of Cambria and San Simeon is long distance, it will save you money to switch to unlimited long distance at a current fixed rate of $14 per month if one makes over 250 minutes of combined local long distance and long distance calls per month.
(2) Many locals have been paying a monthly charge for inside wiring. With many power failures and wind driven rains over the years, many residents have never had an inside wiring problem. Currently the monthly charge for this insurance is $7, which equates to $84 per year. A service call in connection with an inside wiring problem could cost as much as $125. If you can afford to take the risk, you might want to consider self-insuring and saving the $7 month charge.
(3) Many Cambrians have unlimited local service and currently pay $16.45 per month. This price covers all unlimited local calls to Cambria and San Simeon only. Calls to Cayucos, Morro Bay, Paso and San Luis Obispo are considered local long distance. Switching to a measured local call service will reduce the monthly charge to $8.87 per month. For $8.87 you get the equivalent of about 250-300 minutes per month; and if you go over the minimum, you pay $.02 for the first minute and $.04 per minute thereafter.
Widespread use of e-mail service has allowed many of us to cut back significantly on the number of minutes spent on local calls. If you try it out and it doesn’t work, you can always change back. There is currently a one-time charge of $14.25 for making the change; and on occasion, you just might be able to get AT&T to waive the charge. Keep in mind that not all of these programs may work for you. Rates do change so check out the latest guidelines from your local telephone provider.
(4) If Charter provides both your e-mail and TV service, you may discover that by checking with them every 6 months, you may be able to re-negotiate further savings by taking advantage of one of their many promotions to supplement some of the lost income from your fixed income investments.
You might want to consider spending some of your new-found savings by shopping at your local stores and markets, increasing your local charitable contributions, supporting the many restaurants in town and buying your produce at our farmers market every Friday afternoon.
Cambria resident Mark Kramer is retired from the investment field.