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Elder Index: 41% of Retirees 'Can't Cover Basic Needs'

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By    |   Monday, 02 March 2020 11:30 AM

At least 41% of all retirees nationwide are “economically insecure” and at risk of not being able to pay for basic needs, according to recent estimates of financial insecurity among Americans 65 and older from the Gerontology Institute at the University of Massachusetts Boston.

The Elder Index calculated by the university and other researchers tracks the income needed for older adults in good health. It shows that on average a single person without a mortgage requires $21,012 per year to pay for basic needs, or $31,800 per couple. Regional price variations change the estimates significantly, Bloomberg explained.

The university recently released new data for 2019, and it shows that more than 40% of Americans over age 65 living alone have incomes that are below the index - in other words, they lack the resources to pay for their basic living needs. For couples - who usually benefit from two Social Security checks and are more likely to have other income - the comparable figure is 23%.

The index is calculated for every county in the United States, which means it takes into account regional variances in the cost of living. 

While those figures are shocking, and they are much more dire than the federal measure of poverty used to establish eligibility for many state and federal assistance programs.

For example, a measure used by the U.S. Department of Health and Human Services defined poverty for single people last year at annual incomes of $12,490 and $16,910 for couples, Reuters reported. That translates into poverty rates of 18% for singles and 5% for couples - much lower than what the Elderly Index suggests, Reuters reported.

The tally for the Elder Index varies based on an individual’s or couple’s situation. For those who no longer have to pay a mortgage on their home, the Elder Index is $21,012 annually for an individual and $31,800 for a couple.

“We’re not seeing any improvement in the share of people who have incomes above the Elder Index,” Jan E. Mutchler, professor of gerontology and director of the Center for Social and Demographic Research on Aging at the University of Massachusetts Boston, told CNBC.  “We’re seeing sustained high levels of people who do not appear to have the resources they really need to get by in retirement,” she said.

However, Forbes cautions to take the results with a grain of salt and a lot of healthy skepticism. The problem is with how the Elder Index sets these spending thresholds.

"Here’s the problem: by definition, half of the population spends below the median and more than half spends below the average. Half pay less than the median housing cost, but that doesn’t mean their housing is inadequate. More than half pay less than the average cost for transportation, but perhaps they have a less expensive car or drive fewer miles," Forbes explained.

"And much more than half pay less than the average healthcare costs, because the average is skewed by a small number of patients with very high costs. Moreover, about one-fifth of retirees receive health coverage from Medicaid, which covers their Medicare premiums, co-pays, prescription drugs and other costs. They don’t need to cover the same out-of-pocket costs as middle or higher-income retirees," Forbes said.

"In other words, the Elder Index sets its spending thresholds in such a way that almost pre-determines that a lot of retirees will be deemed economically insecure. Unless we live in a Lake Wobegon world where every retiree’s income is above average, someone has to fall below the spending thresholds set by the Elder Index. But simply having a below-average income doesn’t make a retiree economically insecure."

Material from Bloomberg and Reuters has been used in this report.

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At least 41% of all retirees nationwide are “economically insecure” and at risk of not being able to pay for basic needs, according to recent estimates of financial insecurity among Americans 65 and older from the Gerontology Institute at the University of Massachusetts Boston.
elder, index, retirees, basic, needs
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2020-30-02
Monday, 02 March 2020 11:30 AM
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