Middle-Class Security Late in Life

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 middle-class security for Americans who reach advanced old age.

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 middle class security.  However, these discussions have largely focused on the problems with attaining middle-class security early in life. Relatively few have addressed maintaining middle-class security late in life.

The impoverishment of the very old who were once middle class is so routine that we scarcely note it, and yet understanding the unraveling of middle-class security in late old age is critical to some of the most important policy issues of our time.

To fill this gap, the AARP Public Policy Institute Middle Class Security Project addressed the many challenges to middle-class security experienced over the course of retirement years. One of the most alarming findings from the research we reviewed was that nearly half of older people have essentially no financial assets when they die. Our research also found that the largest percentage increases in debt in recent years were among those age 75 and older, often to meet basic needs when other resources have been exhausted.

Longer lives and more extended periods of retirement mean that people will have to save more during their working years and will have to work longer to ensure a secure old age. But research consistently indicates that savings rates are too low, especially after including the effects of the recent 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 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 that takes into account health care costs - shows 15 percent impoverished.

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.

Author: Don Redfoot was project manager for the AARP Public Public Institute Middle Class Security Project.

Michael JN Bowles

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