Senior and Middle Class Economic Security
Senior Economic Security
Senior Financial Stability Index (SFSI)
Unlike traditional measures of poverty (e.g. the Federal Poverty Guideline), the SFSI recognizes that economic well-being is multifaceted and cannot be adequately measured by a single aspect of a household’s resources. The SFSI incorporates five key factors that impact economic security:
- retirement assets
- household budget
- healthcare expenses
- home equity
- housing costs
By this measure, a household is deemed to be secure if it meets the security threshold for the asset factor plus two of the four additional factors. Conversely, a household is insecure when it is insecure in the asset factor, as well as two other factors.
Living Longer on Less Series
For senior citizens, especially single women or citizens of color, economic developments in recent years have put their financial security increasingly at risk. Seniors at risk of outliving their resources have increased by nearly 2 million households in recent years. IASP’s research investigates the causes of the decline in senior economic security and explores policies that can help advance the asset security and financial stability of older Americans.
In the wake of the Great Recession, growth in employment rates and small gains in the construction and housing sectors have indicated that the national economy is on the road to recovery. Yet, the number of seniors at risk of outliving their financial resources remains unacceptably high. The most recent report, released in February 2015, reveals no significant improvement over the previous years: one-in-four older Americans were found to be insecure in 2004, and that number increased to more than one-in-three by 2008. As of 2010, just over one-third of all older Americans remained economically insecure.
The costs facing seniors, including healthcare, housing, and other household expenses, have remained high through 2010. Changes to Social Security have been and continue to be widely discussed. These changes mostly focus on cutting benefits for current and future beneficiaries. Similar proposals to reduce Medicare and Medicaid benefits will only increase the already high levels of economic insecurity, sending thousands of older adults into poverty.
Policymakers should avoid cutting the two existing programs that are the backbone of retirement security in this country—Social Security and Medicare—while expanding the availability and reliability of additional retirement programs for working-age people as well as seniors. Other forms of retirement income, such as pensions, investments, and savings accounts, should be made more widely available to workers across sectors, including those in low-wage occupations, so that older Americans have more asset wealth and budget stability to wealthier financial stocks. A comprehensive approach for expanding retirement resources to families of all economic backgrounds is needed to ensure the next generation of retirees can look forward to a secure retirement.
Almost half of single women over the age of 65 face the real crisis of outliving their financial resources. Most have very limited resources and are forced to make daily tradeoffs between paying bills, forgoing home maintenance or medical needs. Released in October 2011, this report reveals that economic insecurity among single senior women is on the rise. Between 2004 and 2008, economic insecurity among this population subgroup increased by one-third, from 35% to 47%.
Faced with limited assets, rising costs, and longer lifespans, many senior single women are simply running out of economic resources. Women, in particular, have been limited in their capacities to build adequate retirement assets. Therefore, to promote long-term economic security, policy changes must encourage the development of retirement wealth for working age women across the life course, and shore up existing social programs and resources.
Released in September 2011, this report reveals crisis levels of economic insecurity among current African American and Latino seniors. Even before the full impact of the Great Recession hit, seniors were seeing their retirement security steadily and rapidly destroyed. The elimination of secure pensions for most Americans combined with rising costs of basic expenses has resulted in a dramatic rise in senior economic security. While the recession slammed most seniors, people of color were especially hard hit; with very limited assets and resources to cushion the blow, many are falling deeper and deeper into the well of financial security. More than half–52%—of African Americans and 56% of Latino seniors do not have adequate retirement resources to meet their basic needs throughout their expected life spans.
Though significant gains in economic security of older adults have been made since the establishment of Social Security and Medicare, these programs, while a bulwark against destitution, provide limited resources that are insufficient to cover all retirement needs. To change the dire economic reality for seniors of color in the U.S., policies and programs to support older adults should be defended and potentially expended. Looking at the factors that contribute to long-term economic insecurity for seniors of color it is clear that lower long-term assets, including Social Security and pension wealth, as well as lover home ownership rates have left seniors of color in a much more precarious position during retirement than their white peers.
Public policies contributed to the current reality and can change it for the better. While today’s people of color do not face the same levels of overt discrimination as their parents did, segregation and discrimination remain barriers to economic equality across the life course. By widening economic opportunities for all as well as reinforcing supports for today’s seniors, such as Social Security and Medicare, policymakers can reverse the existing trends for seniors of color.
Released in July 2011, this report reveals a troublesome trend of increased economic of increase economic insecurity among senior households. Between 2004 and 2008, economic insecurity among seniors increased by one-third from 27% to 36%. Contrary to the popular belief that seniors have ample time and resources for a fulfilling retirement, objective measures show that 40% of senior households are financially vulnerable, three-quarters of all senior households find themselves in an economically precarious position with little or no buffer against financial ruin should they be faced with an unexpected illness or other traumatic life event.
Our findings show that many of America’s current seniors struggle just to make ends meet, and their economic prospects are declining year after year. Today’s 50-year-olds are much less likely than current seniors to have a defined benefit pension that would provide a life-long secure income. Many of today’s workers are not offered a retirement account of any kind and for those who do have an employer-sponsored 401(k) or other defined contribution plan, most are woefully underfunded. Social Security remains the primary source of income for most retirees and is the only secure resource guaranteed to provide income throughout retirement for many households.
Important steps can be taken to protect all of us against economic vulnerability during our “golden years.” Discussions in Washington are dominated by those who believe the only way to reduce the deficit is by dramatically altering Medicare and Social Security. Already, cash-strapped states have reduced or eliminated funding for vital senior services that prevent or delay the need for more expensive hospitalizations and levels of care, such as adult day care and in-home services. Such actions will only worsen current trends and will further undermine the economic prospects of future seniors.
"Living Longer on Less in Massachusetts: The New Economic (In)Security of Seniors"
The social contract for seniors in the 20th century was based on the prospect of a secure retirement during the later stages of each American’s life course. With the inception of federal programs, such as Social Security and Medicare, the contract grew and adapted to the changing times. Due to these social investments, poverty among the elderly declined and a secure retirement with incomes from three complementary sources (Social Security, pensions, and savings) became a common vision and expectation for older adults in the United States. However, recent fundamental changes in the lives of older Americans, such as increasing longevity, weakening of pension incomes, and dramatically rising expenses for healthcare and housing have eroded the financial stability of the three-legged stool of retirement security. These shifts make it more difficult for seniors to enter retirement with economic security and to remain economically secure throughout retirement.
In light of these altering conditions, this report—released in March 2009—assesses how the social contract is holding up into the 21st center for seniors residing in Massachusetts by examining long-term economic security of senior households in the state. We found that 68% of all senior households in the state are financially vulnerable. That is, close to seven in ten senior households do not have sufficient financial stability to sustain them through their lives. This risk is especially pronounced for single senior households with 82% among them facing financial insecurity. This changing economic environment poses steep challenges for seniors today and highlights the importance of a comprehensive assessment of security.
Released in May 2010, this report examines the economic security of African American and Latino senior households. The data used in this report were collected before the Great Recession of 2008 – 2009. This recession has been characterized by dramatic losses in assets, particularly in housing assets, which are the primary source of wealth for most American Households, especially senior households.
The report finds long-term economic security and risk for 91% of both African American and Latino seniors. Therefore, 9 out of 10 senior households of color do not have sufficient economic security to sustain themselves through their projected lives. Among Latino single seniors, only 4% are financially secure.
Economic insecurity is much more widespread than official poverty numbers suggest. It is important to note that this economic vulnerability is not evenly distributed across the population of older adults in the United Stated. The direction policymakers must take to address poverty among African American and Latino seniors is clear. They should promote comprehensive reforms that support all working age adults in maintaining economically secure and healthy households. Policy should help families prepare for retirement by reinforcing our crucial existing programs for seniors to ensure that the most economically vulnerable are protected from poverty in their later years.
Released in January 2009, this report examines the long-term economic security of seniors, depicts current trends, and suggests policies promoting the enduring well-being of seniors. Economic security of seniors is challenged by two simultaneously occurring trends: a weakening of the three legs of retirement security—Social Security, pensions, and savings) and dramatically increasing expenses (i.e. healthcare and housing). These fundamental changes in the lives of older Americans make it more difficult for seniors to enter retirement with economic security and remain economically secure throughout retirement.
The report finds that 78% of all senior households are financially vulnerable when it comes to their ability to meet essential expenses and cover projected costs over their lifetimes. Economic insecurity is particularly pronounced for single senior households with 84% among them facing financial insecurity. These sobering statistics serve as an economic distress signal for older Americans and a wake-up call for younger and middle-aged Americans.
Unless we attend to policies that grow and stabilize Senior’s resources for the future, retirees face a bleak outlook. Policymakers have an opportunity to reaffirm their commitment to ensure that elders have the resources to live without fear of poverty or economic insecurity. We must strive to construct a new retirement security system that meets the needs of our diverse and aging population.
Middle Class Economic Security
Middle Class Security Index
IASP, in collaboration with Dēmos, created the Middle Class Security Index (MCSI), a comprehensive multi-dimensional measure of middle-class economic security and risk. Using Consumer Expenditure Survey data, the MCSI combines data on education, assets, housing, budgets, and healthcare to determine thresholds for optimal economic security, and risk to falling out of the middle class. This index examines areas of vulnerability for middle-income households, suggesting a range of policy and educational implications to improve their future security.
Tracking the Decline: Middle-Class Security in the 2000s
The security of the middle class has faltered in the wake of the recession, a trend expected to have long-lasting effects as Americans move toward retirement. Among working-age middle-income families, those defined as “secure” fell by 38 percent from 2004 to 2010, and the proportion defined as “vulnerable” grew by 42 percent.
The findings in this paper are based on a new Middle Class Tracking Index developed by IASP in conjunction with AARP’s Public Policy Institute. The report describes trends in security based on age, educational attainment, race/ethnicity, and family status. For more information about this study, please contact Tatjana Meschede at 781-736-8678.