There are numerous indexes and measures for determining what—financially—is necessary to live in the U.S. today. When it comes to the elder population, or people above the age of 65, determining the financial cost of living is complicated by several factors. These include questions such as how many children does the individual has, their socio-economic status, whether or not they are married, where they live, and what kind of medical conditions they live with.
The Elder Economic Standard Index, often referred to as the Elder Index, seeks to tabulate these questions and determine what the cost of living is for those over 65. It calculates, specifically, the cost of housing, health care, transportation, food, and includes a miscellaneous essentials category. These costs are then calibrated based on family type and location within the U.S.
Many economic indexes use a bare-bones approach of what it takes to make ends meet, and the Elder Index is no different. According to Living Below the Line: Economic Insecurity and Older Americans Insecurity in the States 2016, a study released by a team at the Center for Social and Demographic Research on Aging Gerontology Institute at UMASS Boston, the Elder Index “defines economic security as the income level at which elders are able to cover basic and necessary living expenses and age in their homes, without relying on benefit programs, loans or gifts” (Mutchler, et al., 2016). As the title of the study suggests, several elders do not meet the average annual level of $20,064 (for a single adult living alone).
While it is true that the Elder Index includes a small monthly amount for miscellaneous expenses, the Elder Index does not account for the costs of preserving dignity while aging.
Anyone who has lived to their elder years has spent decades working hard just to support themselves and their families. Everyone hopes to retire in comfort, with enough saved away to at least meet living expenses, let alone experience new things and fill their remaining time with engaging activity. The Elder Index does not account for this.
Medical expenses, furthermore, are calculated as a generalized, average rate. In our elder years, we are incredibly susceptible to injury, unexpected illness. We are additionally less equipped to deal with ordinary illnesses, such as viruses and the flu. At any given time, an unexpected event could cause medical bills to rise significantly. The second an event such as this occurs for people just barely meeting the amount predicted by the Elder Index, furthermore, he or she must rely on family or the state (which for some means sacrificing some amount of their dignity) to maintain their health.
The Elder Index, following the last point, also only provides a figure on a year to year basis. Many people above the age of 65 may meet its standards for decades of their elder years. It does not, however, take much for a life-altering injury or illness to completely change that reality. A couple working past the age of 65 might pool their income and live a comfortable life. When one of them gets injured, however, and their spouse is called upon to become their primary caregiver, they can easily slip below the line mandated by the Elder Index in a short period of time.
While the Elder Index may be a step above the base amount needed to live in the US for anyone 65 and above, it does not sufficiently account for the costs needed to live with dignity. It’s largest pitfall, furthermore, is a static monthly calculation of what is needed to meet medical expenses.
How do you feel we can best “fix” the funding problems?
In many countries throughout the world, the solution to an aging population is simple: health care is provided by the government for anyone and everyone. In the US, however, that has yet to become a reality. Especially considering recent political developments, the reality of our government expanding any kind of public service seems distant at best.
Because care giving and healthcare will be controlled primarily by private institutions in the short term, at least, it may be prudent to take advantage of global shifting demographics. If policymakers can be made to see the potential profits of an aging population, perhaps they can be persuaded to tax that revenue and redirect it toward Social Security, Medicaid, or distribute it amongst states to help combat the financial woes of individuals who do not meet the stipulations of the Elder Index.
PGIM, an investment firm, recently released a report titled A Silver Lining: The Investment Implications of an Aging World. According to Taimur Hyat, PGIM’s chief strategy officer, these trends are incredibly reliable and will not greatly change. “We are very long-term investors and one of the best ways to do that is by finding out excess investment returns in longer-term structural trends,” Hyat said in an interview with Richard Eisenberg of Forbes. “You can set your watch to them. And aging is one of them.”
Hyat’s report cites a few statistics: life expectancies on the global scale have rise from 49 in 1955 to 72 today. In the US, these figures are even higher. By 2040, furthemore, the population of individuals 65 and over will double, while the over-80 demographic will triple. As these sections of the population rises, so too will their spending habits. In the US, people over 55 spend double the amount annually that Millenials do (Eisenberg, 2016).
Hyat believes that five investments will become particularly lucrative over the next 10-15 years. They are condominium structures, senior housing, urban life center clusters, pharmaceuticals, and biotechnologies. “Two things tuck out at us as we looked at all the data on aging,” Hyat said. “One was the amount of elderly people in emerging markets. The other was, and this is especially relevant to the United States, there’s been a lot of focus on Millenials, but they control only a tiny percentage of wealth and spending. Over 50% of wealth and spending is concentrated among people in the boomer bracket and to a large extent, they define which sectors do well.” (Eisenberg, 2016).
While it is unlikely that current US policymakers will come up with a government-initiated solution to the mounting aging crisis, perhaps they can be persuaded to aid the private sector in investments that take advantage of an aging population, and then tax a percentage of their earnings. What this could potentially look like would be available government loans, at a low interest rate, to companies looking to take advantage of both national and international demographic shifts. Once these companies become profitable, a percentage of their earnings could be taxed and then used to either bolster Social Security, Medicare, or be distributed amongst states with the specific directive to be used to aid their aging populations.
Why is it important? What happens to those who don’t meet the standard? What happens to those who just meet the standard?
Providing for an aging population is both a selfish and an ethical issue. Humans are an altruistic species: we take care of those who are unable to take care of themselves. At all levels of society, be it in the home, on the street, or with government policy, we ensure that children do not have to work before a reasonable age; we provide services for veterans who have seen combat; we protect the mentally ill and help them navigate through society.
While many above 65 are perfectly capable of taking care of themselves and living rewarding lives, their ability to do so begins to degrade the more they age. The ethical reasons to take care of this demographic of society are intrinsically true: it serves the betterment of our entire society.
There is another, less abstract reason to take care of the aging population: we expect the same treatment once we reach that age. We learn best by following the examples of those who came before us. If we do not take care of our aging population, subsequent generations will follow our lead.
According to the 2016 report Living Below the Line: Economic Insecurity and Older Americans Insecurity in the States, “half of older adults living alone, and one out of four older adults living in two-elder households, lack the financial resources required to pay for basic needs” (Mutchler, et al., 2016). For these people who live below the line, they must rely on Social Security benefits to make up the remaining gap in their incomes. Over half of adults living with annual income below what the Elder Index requires, furthermore, rely on Social Security for 90% of their income (Mutchler, et al., 2016).
Because social security is not intended exclusively for older adults, this puts strain on the entire government program. As more and more older adults draw such significant amounts of their income—which is already not enough—from Social Security, other, younger recipients will receive less. As more and more strain is put on the system, working generations will save less and less, and in turn, create an even greater aging population that depends on Social Security.
For those, furthermore, who meet the requirements of their local Elder Index, life still is not easy. Five years ago, an aging Las Vegas couple profiled on AARP.com, Gail and Lewis Halverson (56 and 70, respectively), both held jobs and were making ends meet (Yeoman, 2014). When Lewis tripped and fractured his back, however, everything went downhill. Soon, he suffered further health issues: a broken hip, skin cancer, and the onset of dementia. Gail tried to rearrange her schedule to aid Lewis at home, but her employer refused, and she had to leave. She found another job making $7.55/hr.
To cope with medical bills, the couple spent their entire savings. When that ran out, they could no longer pay their mortgage and were forced to move into a one-bedroom house, far away from their family. The couple applied for Medicaid and food stamps, but they were told they did not qualify; they made too much money.
The poverty line in the U.S. for a two-adult household headed by someone over 65 is $13,014. Millions of people over 65 live between incomes predicted by the Elder Index and what constitutes poverty. Many of them, furthermore, live completely on the edge. One accident or illness can set off a chain reaction that will completely alter their life. The Halvorsons make a typical example of people who are not adequately represented under the criteria of the Elder Index.
There are two vulnerable groups of people when it comes the aging population. These are both the working poor, who have received subsidies from the government throughout a significant portion of their working lives. The other are those who just barely meet the annual income predicted by the Elder Index, or who fall just below it. These are the people like the Halversons.
One of the great disadvantages of the Elder Index is that it assumes a steady income. It works on a year to year schedule. Many people 65 and older have led healthy lives. They know that health issues, issues, especially the expensive kind, are not uncommon, but they do not necessarily expect them coming. Knowing that your way of life hangs in such a fine balance can be difficult to grasp, and even tougher to believe.
If we do not provide the necessary aid for the aging population of Americans above 65, they will continue to live their lives as best they can until a game-changing event occurs like it did for Lewis Halverson. If the Halversons continue to decline, like the majority of people living below the Elder Index they will then depend primarily on Social Security. By helping the population of elder Americans stay above the income suggested by the Elder Index, we will help prevent other costly injuries by giving them the means to deal with these issues independently, and with dignity.
Eisenberg, R. (2016). How To Make Money From The Global Aging Megatrend. Forbes. Retrieved from https://www.forbes.com/sites/nextavenue/2016/05/09/how-to-make-money-from-the-global-aging-megatrend/#6fa08e15a41f.
Yeoman, B. (2014) Living on the Edge. AARP The Magazine. Retrieved from http://www.aarp.org/money/budgeting-saving/info-02-2010/living-on-the-edge.html.
Mutchler, J.E., Li, Y., & Xu, Ping. (2016) Living Below the Line: Economic Insecurity and Older Americans Insecurity in the States 2016, 1-12.