Associated Press

Higher energy costs concern consumers--survey

By DAVID PITT 08.26.08, 7:13 PM ET

DES MOINES, Iowa - Retirees Madeline and Philip Ammon are feeling the financial pinch as their home energy costs climb while their income - primarily Social Security - remains mostly stagnant.

The Laurel, Md., couple have been forced to begin drawing $300 a month out of retirement savings just to keep up with climbing costs.

"I feel like we're drowning," Madeline Ammon said. "Everything's going up so fast. I feel overwhelmed and I fear we cant keep up with it."

Ammon, 68, retired in 2003 from her job registering patients in a hospital emergency room. Philip, 69, a food broker, retired a year ago.

Their predicament is common among older adults, according to an AARP survey to be released Wednesday.

"People are feeling the pressure on every front. The cost of medicine, cost of food, cost of energy it's all going up," said AARP Chief Operating Officer Tom Nelson.

The national telephone survey of 1,255 respondents aged 45 and older was intended to determine how people are coping with rising energy costs and related economic issues, the group said.

Nelson said taking retirement money out early to keep up with higher costs is a frightening trend.

"When you lose the benefit of compound interest, you're undermining your retirement potentially for years and decades to come," Nelson said.

More than half of those making below $50,000 a year said paying the utility bill is harder due to the economy, and 35 percent said it's harder to make their home mortgage payment, while less than a third of those making over $50,000 said paying utilities is harder and only 17 percent said its harder to make the mortgage payment.

One quarter of those in the lower pay range said the economy has led them to prematurely withdraw retirement funds, while only 13 percent in the upper pay range said they had to resort to those measures.

Madeline Ammon said she's afraid Medicare costs will go up at the same time her husband's Social Security raise is being more than eaten up by escalating prescription costs. He ended up with $8 a month less this year than last, she said. She got $13 more monthly than last year. Their utility bills went up about $50 a month.

"It's like I'm juggling. When are the balls going to start falling?" she said.

Nearly 75 percent of those questioned in the AARP survey reported a rise in their home heating and cooling costs over the last year, and 79 percent said they expect the costs to go up again next year. Nearly 70 percent said they're worried about it.

From 2003 to 2008, average home heating oil costs have gone up nearly $1,500, the AARP said. The average natural gas cost has risen more than $800. A government program designed to offer grants to those who cannot pay their utility bills pays just $300 in a given year.

Just 17 percent of those surveyed said elected officials are doing enough to help people pinched by the higher costs.

The results show the impact on those making less than $50,000 is much more severe than those with higher incomes.

Nearly 70 percent of those in the lower income range said the economy makes it harder to pay for essentials such as food, gas and medicine while just 35 percent in the higher pay range agreed with that statement.

The survey revealed 57 percent said they'd adjust their holiday spending because of higher home energy costs. That number was 67 percent for those making less than $50,000 a year. Far fewer - 44 percent - among those earning over $50,000 a year said they would cut back on holiday spending because of rising home costs.

The AARP survey was conducted by the independent research company International Communications Research between Aug. 1 and Aug. 10. Those answering the questions identified themselves as the person handling the energy bills or knowing how much they spend on heating and cooling in the home.

The margin of sampling error was plus or minus 2.8 percent.