Written by Brandy Bauer, Communications Manager, Economic Security, National Council on Aging (NCOA). NCOA would like to thank Naomi Stanhaus of the Retirement Research Foundation for her contributions to this fact sheet. GIA would like to thank Ellen Bruce for her contributions to updating this fact sheet in April, 2016.
Roughly 25 million Americans aged 60+ are economically insecure—living at or below 250% of the Federal Poverty Level ($29,700/year for an individual in 2016). These older adults face a daily struggle to pay for out-of-pocket medical expenses, utility bills, food, housing, and transportation costs. Even for those seniors who live above the poverty level, one major adverse life event—such as a job loss, health crisis, or foreclosure—can plunge them into poverty. The challenge of serving these vulnerable older adults will only rise over the next decade, as the total number of economically insecure seniors will increase to 28 million by 2020 (Figure 1).
Economic insecurity disproportionately affects women and people of color. Approximately 60% of older women are unable to cover their basic, daily expenses compared to 41% of older men. Among older women of color, 60% of Hispanic women and 65% of African American women are aging into economic insecurity. Seniors of color also typically experience more chronic health conditions, yet have fewer resources to cover the costs associated with treating those illnesses. Economic insecurity also rises with age as work becomes difficult or impossible, health care costs increase, and spouses pass away.
Impact of Economic Insecurity
The manifestations of elder economic insecurity take many forms—including unemployment, housing crises, diminished savings, and negative health outcomes―and are costly both to individuals and their communities. Mature workers made up 8.9% of the unemployed population in the U.S. in 2014. The unemployment rate for Americans aged 55+ doubled after the recession began: in May 2010, 60% of unemployed older workers had been out of work for six months or longer, and 43% had been without a job for more than a year. Nearly 1.2 million older workers work part-time because they cannot find full-time work.
Homeownership, once the cornerstone of economic security, has become a source of stress and debt. A majority of older adults has unsustainable housing costs, with 59% of older renters and 33% of homeowners with mortgages spending more than 30% of their income on housing costs. Growing numbers of older homeowners face foreclosure, while Baby Boomers are increasingly tapping into their home equity to help fund their pressing financial needs.
Millions of older Americans also have seen their hard-earned retirement savings diminish, while personal debt has risen. In 2013, 61.3% of households headed by an adult age 60+ had some form of debt. Among senior households with debt, the median total debt was $40,900.
Social Security is the bedrock of economic security for the majority of older adults. For 3 out of 10 retired seniors, Social Security provides more than 90% of total income. At the same time, with an average benefit of $1,341 per month in 2016 (or 135% of the Federal Poverty Level), Social Security payments alone are inadequate to lift seniors out of poverty.
There is also a strong link between economic insecurity and chronic illness. As Figure 2 illustrates, more than half of all older adults have two or more chronic health conditions, but this number is greater among those living below 250% FPL. Chronic diseases account for 75% of the money our nation spends on health care, and without appropriate management of illness, many seniors face early and unnecessary institutionalization.
Seniors who lack financial stability often take dangerous measures that can negatively impact their well-being, such as skipping meals, failing to adhere to their medication regimen, or keeping their homes at inadequate temperatures. Public benefits can play a critical role in mitigating these risks by helping to pay for health care, food, prescriptions, and utilities. Yet public benefits remain woefully undersubscribed by seniors. For example, despite 5 million older adults living with the threat of hunger, only 41% of those eligible for food assistance (via the Supplemental Nutrition Assistance Program, or SNAP) are receiving it. Close to 2 million seniors are missing out on the Medicare Part D Low Income Subsidy, which pays for prescription drug coverage and is valued at $4,000 a year.
At the same time, the ways in which these programs are structured do not reflect current realities. The traditional measurement of poverty, which forms the basis for eligibility for many benefits, is the Federal Poverty Level (FPL). The FPL is rooted in an antiquated formula based on the assumption that food consists of one third of one’s budget. Since its inception in the 1960s, the FPL has only been updated annually using the Consumer Price Index for the general public, which doesn’t account for the disproportionate out-of-pocket health care costs incurred by seniors. By all accounts, the FPL is viewed as inadequate to accurately assess the needs of low-income older adults.
In response, analysts from the Census Bureau and Bureau of Labor Statistics have begun to develop the Supplemental Poverty Measure (SPM) to better reflect contemporary social and economic realities. The SPM is intended to complement the FPL measurements but also take into account additional items such as benefits, tax payments, and work expenses in estimating family resources. Using SPM estimates, roughly 15% of adults aged 65+ live in poverty, compared to the 9% official figure using only the FPL.
Other proposed measures—including Wider Opportunities for Women’s Elder Economic Security Standard™ Index and the Institute on Assets and Social Policy’s Senior Financial Stability Index—provide a more comprehensive measurement that uses local expenses, savings requirements, family composition, and data from the city, county, and state levels to estimate the true measure of economic well-being. These alternative measures are rooted in the acknowledgement that economic security is a function not only of one’s income and support but also geographically specific costs of living.
Grantmaking on elder economic insecurity to date has focused on new metrics and tools to better assess current programs and policies, on how the most recent economic downturn has affected seniors, and on disparities and income inequality among racial and ethnic minorities.
While much of the investment has been sector-specific (e.g., affordable housing, job training, transportation, health care coverage), there have been a few overarching attempts to look more holistically at economic security:
- In early 2005, The Retirement Research Foundation (RRF) invested in the development of a new methodology aimed at determining what it means to age in place. At that point, RRF invested in Wider Opportunities for Women (WOW) and the Gerontology Institute at University of Massachusetts to design WOW’s Elder Economic Security Standard Index or Elder Index. The Atlantic Philanthropies followed with an investment in a national database, allowing the Gerontology Institute to calculate the Elder Index for every county in the country with variation based on household composition, housing, and health status (www.basiceconomicsecurity.org).
RRF has also funded the National Council on Aging (NCOA) to develop, test, and bring to scale EconomicCheckUp®, a free online tool based on BenefitsCheckUp® that provides older adults with a comprehensive assessment of their economic situation and guidance on the range of options that will lead to greater economic security.
- In 2009, Brandeis University’s Institute for Assets and Social Policy designed the Senior Financial Stability Index and launched a series of briefs using the Index to benchmark risk of vulnerable populations with support from the MacArthur Foundation.
- The Atlantic Philanthropies funded NCOA’s national video advocacy campaign, One Away, to draw attention to the problem of elder economic insecurity and advocate for reauthorization of the Older Americans Act, which provides programs that promote health and economic stability. Atlantic also funded Wider Opportunities for Women’s Elder Economic Security Initiative to advance research and promotion of the Elder Index.
- The Harry and Jeanette Weinberg Foundation has supported a variety of efforts focused on strengthening community services for low-income elderly, including the NCOA Economic Security Initiative to provide comprehensive and holistic case management to vulnerable older adults through bundling of supportive services and strengthening community partnerships. The Initiative continues to be supplemented by local foundations who have also invested in Economic Security Centers in their communities.
- Bank of America Charitable Foundation identified the need for financial education lessons customized to meet the unique economic needs of vulnerable low to moderate income older adults. In partnership with NCOA, the Savvy Saving Seniors™ series was launched in 2010. The series focuses on basic budgeting, accessing public benefits, and tips on avoiding scams.
- The Kaiser Family Foundation released an important brief, Key Issues in Understanding the Economic and Health Security of Current and Future Generations of Seniors, in early 2012. The brief examines the role of entitlement programs in ensuring seniors’ financial security as well as the challenges facing current and future generations when it comes to economic and health security.
- Thanks to investment by The Atlantic Philanthropies, the following initiatives were launched:
- National Community Reinvestment Coalition’s National Neighbors Silver is a multi-year campaign to empower, organize, and support economically vulnerable older adults. The campaign combines advocacy, organizing, and direct service to promote access to quality banking services and adequate housing for older adults. Working with the banking industry, the aging network, and housing experts, National Neighbors Silver offers a platform for policy and program solutions to build economic security and preserve wealth for aging America.
- The National Federation for Community Development Credit Unions launched Better Directions, a nationwide program to help low-income seniors gain financial security. This program, with its emphasis on economic security offered at the local level by community development credit unions in collaboration with community-based organizations serving seniors, provides tested solutions to help older Americans remain financially stable and independent.
Grantmakers might also consider these areas for potential investment:
- Evaluating whether holistic approaches to economic assistance designed for other populations―such as economic casework strategies used by the Annie E. Casey Foundation’s Centers for Working Families, the Community Action Network’s Self-Sufficiency Programs, and/or the United Way’s Prosperity Hubs―can be replicated and used for low-income older adults.
- Supporting increased collaboration between traditional aging services providers and other existing community services such as debt management services, transportation providers, and community credit unions.
- Consider reorganizing grant portfolios to emphasize a holistic approach to economic security, as done by The Walter & Elise Haas Fund in San Francisco.
- Raise awareness of the impact of economic insecurity on all aspects of individual and community life. For example, the Arizona Grantmakers Forum held a series of tri-sector stakeholder convenings related to the concept of elder economic security. A similar stakeholder meeting was convened in 2012 by the Midwest Funders Forum to engage funders in thinking about innovative approaches to help older adults work toward financial stability.
Using legislation to articulate economic security goals and drive programmatic and planning efforts
Thanks to the strong advocacy efforts of organizations working on behalf of vulnerable populations, policymakers increasingly have begun to include economic security definitions and goals within key legislation affecting programs for older adults. For example, in 2011, California became the first state to enact legislation that requires state and local aging agencies to use the Elder Index to craft more effective programs and policies for California's aging population. New Jersey passed a law in 2015 requiring the Elder Index be used to improve coordination and delivery of public benefits as well as be used a planning tool to allocate public resources more effectively.
Grantmakers can contribute to these legislative efforts by supporting necessary research and evaluation to make the case for change, helping raise awareness through public education efforts, supporting community-based organizing to advocate for change, and/or financing direct advocacy or lobbying. As the budget climate becomes more contentious, grantmakers can position themselves to support economic security goals by complementing government policy and funding and/or picking up where government funding has decreased.
Bundling services to increase positive outcomes
The Annie E. Casey Foundation pioneered the Centers for Working Families® approach, which bundles access to a full range of essential economic supports to help families build economic self-sufficiency. While proven successful among younger families, the approach had not been adapted or tested among senior households until 2009, when the National Council on Aging received funding from the Harry and Jeanette Weinberg Foundation and Bank of America Charitable Foundation to do just that. Through the Economic Security Initiative, NCOA and over 20 community partners increased the economic status of over 5,000 older adults by an average or $3,000 a year through a comprehensive, person-centered assessment, an economic action plan, and assistance navigating public and private community resources. One key lesson learned from the Initiative is how valuable paid employment can be to older adults, and future plans to scale the effort will increase focus on job training and development.
Reaching the “unbanked” and other populations isolated from traditional financial services
A FDIC report published in 2012 found that 3.9% of the 65+ population was “unbanked” or lacking access to a checking or savings account. Racial and ethnic minorities, low-income households, and foreign-born individuals were more likely to be unbanked. Similarly, nearly half of the low-income seniors surveyed through NCOA’s pilot Economic Security Initiative were unbanked. Particularly troubling is the fact that, beginning in March 2013, Social Security and agencies administering federal benefits will cease mailing benefits checks: all recipients will be required to receive their payments via direct deposit. The Atlantic Philanthropies is supporting a pilot initiative by NCOA and the National Federation of Community Development Credit Unions that paired community service agencies with community financial institutions to connect low-income, unbanked seniors with economic security supports and affordable banking services.
Combating financial exploitation of older adults
Financial exploitation is one of the most common forms of elder abuse, often perpetrated by those closest to a senior. Yet experts believe seniors underreport the crime because of shame and fear of losing their independence. A recent report from the Government Accountability Office estimated that in 2010, financial exploitation cost older adults close to $3 billion. While there has been considerable attention to the types of scams targeted at older adults, there remains a need for more consumer awareness and education about preventing and reporting financial abuse. One tool that has been developed by NCOA with support from the Bank of America Charitable Foundation is the Savvy Saving Seniors™ financial education toolkit for professionals to educate seniors about financial scams. At the same time, policy tools need to be developed which can protect elders with diminishing capacity who become victims.
Expanding state solutions aimed at increasing pension and retirement savings participation
Several states (California, Illinois. Massachusetts, Oregon, Washington, and New Jersey) have passed laws to expand pensions for working individuals, recognizing that workers are not currently saving enough for retirement. Philanthropic funded research, policy papers, and community organizing have accelerated this process.
Basic References on Economic Security
Grantmakers In Aging: "Elder Economic Security: How Grantmakers Can Help," November 2015.
Grantmakers In Aging, 2014 Conference Highlights: Income Security of Older Adults.
Grantmakers In Aging, "A Primer on Retirement Security," 2016.
Diverse Elders Coalition, “Securing Our Future: Advancing Economic Security for Diverse Elders,” August 2012.
Government Accountability Office, October 2011.“The Effect of the 2007-2009 Recession on Older Adults” A Report to the Chairman, Subcommittee on Primary Health and Aging, Committee on Health, Education, Labor and Pensions, U.S. Senate, October 2011.
National Council on Aging, “Economic Security for Seniors Fact Sheet,” 2012.
AARP Public Policy Institute, “Older Americans in Poverty: A Snapshot,” April 2012.
Center for American Progress, “The Not So Golden Years: Confronting Elderly Poverty and Improving Seniors’ Economic Security,” September 2010.
MetLife Mature Market Institute, “The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders,” June 2011.
AARP Research Center, Economic Security and Work reports
The Elder Index/Economic Security Database
My Retirement Paycheck, powered by the National Endowment for Financial Education
One Away Campaign for Elder Economic Security
Retirement and Economic Security Resources, Gerontology Institute at University of Massachusetts Boston
Smart About Money, powered by National Endowment for Financial Education
Squared Away, a blog powered by Boston College’s Center for Retirement Research
Organizations Focused on Elder Economic Security
AARP Foundation, Income Program
Diverse Elders Coalition, Economic Insecurity Initiative
Center for Retirement Research, Boston College
Insight Center for Community Economic Development
Institute on Assets and Social Policy at Brandeis University
National Council on Aging
Older Women’s League
Pension Rights Center
Women’s Institute for Retirement Security