Greater longevity is a measure of enormous progress for older Americans. But greater longevity has also created new challenges. Particularly troubling is what happens to financial security for Americans who reach advanced old age. As we move toward 2040, the problem becomes more acute. The country is getting older, with fewer workers supporting more retirees. This worker-to-beneficiary ratio currently stands at around 3-to-1; by 2040, it will have decreased to 2-to-1.
Think tanks, academic research centers, and journalists are generating mountains of reports on the plight of the middle class. Political leaders from across the ideological spectrum speak of the importance of restoring a greater sense of middle-class security in Americans. However, these discussions have largely focused on the problems with attaining middle-class security early in life; relatively few have addressed maintaining it late in life. Yet the impoverishment of the very old who were once middle-class is startlingly common—so common that we scarcely note it.
To fill this gap, the AARP Public Policy Institute’s Middle Class Security Project has examined the many challenges to middle-class security experienced during retirement years. Of the research we reviewed, one of the most alarming findings was that nearly half of older people have essentially no financial assets by the end of their lives. Our research also found that people aged 75 and older had the largest percentage increases in debt in recent years, often merely to meet basic needs when other resources have been exhausted.
Longer lives and more extended periods of retirement mean that people need to save more during their working years and have to work longer to ensure a secure old age. The number of people aged 65 and older is expected to double to 80 million by 2040, and the U.S. Census Bureau estimates that by mid-century, Americans will be living on average seven years longer than they are now. Research consistently indicates that savings rates are too low, especially after including the effects of the recession. Despite these findings, recent policy discussions have focused on reducing Social Security cost-of-living increases, which would have particularly devastating effects on the financial security of the very old.
Our Middle Class Security Project found that one of the biggest threats to security late in life comes from the escalating costs of health care. The official federal poverty measure shows 9 percent of older people below the poverty line. But a supplemental measure developed by the Census Bureau—one that takes health care costs into account—raises the number of impoverished older people to 15 percent.
Projections commissioned by AARP indicate that income gains are likely to be wiped out by increasing health care costs when future generations reach age 70 and older. But health care policy discussions have focused on cutting Medicare benefits to older persons, and public policy regarding long-term services and supports still requires that older people impoverish themselves before they can receive public benefits.
As our political leadership debates ways to restore greater security to the middle class, we must make sure that we do not undermine that security for the oldest and most vulnerable Americans. The story about middle-class security isn’t complete by just looking at the beginning—we must also pay attention to the last chapter of life.
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