LTCI Watch: Fed versus older workers

Of course, distinguishing between the effects of Fed policy and investors' choices on the interest rates portfolios earn can be complicated. But I think it's clear that low rates have had many subtle bad effects on older workers — the traditional buyers for long-term care insurance (LTCI) — in addition to the obvious effects on older workers' income from savings, older workers' returns on investments, and the performance of the pension funds and insurance companies that are supposed to get older workers through retirement.

One is that the current combination of low interest rates and high credit standards is destroying the kinds of jobs older workers might like to hold.

The current climate strongly favors publicly traded companies over family-owned businesses, by setting borrowing rates near zero for publicly traded companies, and close to infinity for the owners of the small and midsize family-owned businesses with owners who might, 20 years ago, have bought LTCI for themselves, or even considered paying some of the premiums for true group LTCI plans for their workers. Many of those owners are 55 or older.

Partly because of the uneven flow of credit access throughout the economy, and the lousy state of information of about the credit haves and have nots, many of the companies that have gotten loans have done so using what have turned out to be unrealistic growth projections. To compensate for weak or erratic revenue growth, they're facing pressure to outsource what once were nice, steady, unglamorous office jobs, to show the lenders how they will fatten profit margins by cutting costs. That pressure to outsource previously secure office jobs is hurting many older workers. 

The low rates are also slashing returns on endowment investments. Traditionally, some of the core buyers of LTCI have been university professors, and workers at other types of nonprofit organizations. These days, any older workers at nonprofit, endowment-supported organizations are in the Fed's crosshairs. The low rates are strangling their employers.

See also: Fink sees low rates eroding growth as consumers focus on saving