The complex story of financial security in later life is reflected in competing scenarios presented in the media. A Wall Street Journal piece from March 2022 highlighted the wealth held by older adults and their potential to revive the economy through renewed spending (“Older Americans, flush with housing and stock portfolio wealth, poised to revive spending this year”). In contrast, a post from The Hill just a few months earlier described the experiences shared by millions of older Americans who struggle to cover the costs of basic needs for living and health (“It shouldn’t be this hard to grow old in America”).
Negative cultural views about aging and getting older reduce these scenarios to widely held, disparate stereotypes. One stereotype describes older adults as out-of-touch consumers who stockpile personal assets while drawing on public resources, including Social Security and Medicare. Another depicts older people as frail, vulnerable and living on the edge.
Which Narrative Is True?
In reality, both narratives describe segments of the older population. Older adults, like other age groups in the United States, encounter a high level of inequality, with some Americans doing well financially in later life, while others struggle to cover the basics.
The narrative describing older adults as financially well-off generally draws on data about the distribution of wealth in America. A 2020 report from the Federal Reserve Bank of St. Louis estimated that median household wealth of families headed by Americans who are ages 65 to 75, at $269,000, was more than 10 times the median wealth of those who are ages 25 to 35 (at $24,000), and a 2021 piece in The Wall Street Journal reported that the net worth of people ages 70 and older in the United States accounts for 27% of all U.S. wealth.
Importantly, much of the wealth held by older Americans is in the form of an owned home—more than three-quarters of Americans ages 65 or older are homeowners, six out of ten of whom have no mortgage (calculated by the author from the American Community Survey, one-year estimate for 2019).
‘More than three-quarters of Americans ages 65 or older are homeowners, six out of ten of whom have no mortgage.’
The home equity accumulated by older homeowners over many years is undeniably an important asset. Yet many older homeowners are financially squeezed by property taxes and other costs of owning and maintaining a home, including the recent upward spirals in utility costs.
Also, while theoretically an owned home could be converted to an income stream by taking a reverse mortgage or selling said home, many would like to avoid these options. Attachment to home and community make long-term residents reluctant to sell and leave. The cost of downsizing can be higher than staying put, even in a home that exceeds one’s needs. Subsidized housing is hard to come by in most communities and shifting to a market-rate rental can introduce uncertainty to one’s housing costs that poses challenges on a fixed income.
The precarious financial situation experienced by many older adults is also well documented. The 2020 poverty rate for adults ages 65 and older, at 9%, indicates that 5 million older Americans live in households below the federal poverty line, which for older people living alone is an income of just $12,413 annually, and $15,644 for an older couple.
Analyses based on the Elder Index, a cost-of-living measure designed for people ages 65 and older that incorporates cost-of-living disparities across communities, suggests far higher shares of older adults are financially insecure. Recent estimates indicate that 54% of older women living alone, 45% of older men living alone and 24% of older couples do not have incomes sufficient to cover necessary expenses in the area in which they live.
Moreover, the average Social Security benefit does not cover necessary expenses anywhere in the United States, as measured by the Elder Index—yet a large share of older adults rely largely or exclusively upon Social Security for their income. Many services and supports are available that can help older adults fill gaps between resources and expenses. But the safety net is littered with holes that prevent people from getting they help they need and deserve, including eligibility thresholds that are too low, barriers to accessing supports (such as difficulty finding information in different languages) and stigma associated with asking for help. As a stark example, about half of the older adults eligible for SNAP benefits do not participate in the program.
‘The average Social Security benefit does not cover necessary expenses anywhere in the United States, as measured by the Elder Index.’
Many middle-income older adults, while neither wealthy nor struggling financially, are at risk of becoming financially insecure. An older family may be able to cover their expenses until circumstances intervene: losing a spouse, experiencing a costly health condition, needing long-term care, or experiencing high and unrelenting inflation levels. Unfortunately, these circumstances are common in later life and all too often jeopardize the ability of older adults to maintain an adequate lifestyle.
The Problem of Uncertainty
The potential of long retirements embedded in long lives introduces considerable uncertainty as to how much people really need to get by in retirement, and whether they will be ready when that time comes. Looking into a future of unknown length, many people are uncertain about how long their retirement resources will last, and whether they will be sufficient to support a surviving spouse, a costly health event or a future need for long-term assistance.
Such uncertainty is exacerbated by anxiety over the Social Security system itself: a Pew survey from 2018 suggests that 84% of adults ages 18 to 29, and 89% of those ages 30 to 49, believe that when they are ready to retire, Social Security will provide benefits either at reduced levels or not at all.
Failure to Recognize Heterogeneity Has Negative Consequences
The competing cultural narratives surrounding financial security in later life may stem in part from a lack of consensus about what constitutes adequacy. The most familiar indicator of financial insecurity is the federal poverty level (FPL)—a threshold that is widely understood to be far too low. Because the FPL is used to define eligibility for needs-based supports, the negative consequences for health and well-being are substantial.
These narratives also may reflect a poor understanding of the contours of inequality that shape every stage of the life course and cumulate into later life. The older adults most at risk of experiencing financial insecurity are single women and BIPOC people, who have encountered higher rates of disadvantage in work and compensation throughout the life course. Single women in their 80s and older run an especially high risk of falling into financial insecurity, with 6 out of 10 having incomes below the Elder Index (and see https://scholarworks.umb.edu/demographyofaging/46/).
Failing to acknowledge heterogeneity in the aging experience is a problem. Characterizing older adults as “having it made” financially stems in part from a poor understanding of our Social Security and Medicare systems and a lack of awareness of the low levels of financial resources held by most older Americans—a knowledge gap that may cause younger adults to fail to plan adequately for their own retirement. Estimates suggest that half of households are on a trajectory that places them at risk of being unable to maintain their pre-retirement standard of living in retirement.
Yet characterizing older adults as routinely frail, vulnerable and insecure suggests that financial insecurity is a normal experience of later life and may result in these circumstances being met by policymakers and a public with indifference and lack of compassion. Stereotypes of aging serve as obstacles to building systems that support greater financial security for the older population as a whole.
Jan E. Mutchler, PhD, is a professor in the Department of Gerontology and director of the Gerontology Institute at the University of Massachusetts Boston. She can be reached at Jan.Mutchler@umb.edu.