Today’s financial voyeurs interested in eyeballing someone else’s budgeting decisions can sneak a discrete peek at the daily Money Diaries story on the Refinery29 website.
In excruciating detail, the popular feature records a week of spending decisions made by millennial women positioned up and down the income ladder. They anonymously overshare about their every expenditure, from rent to a shoe splurge.
Readers are clearly interested in such financial eavesdropping—there’s a Money Diaries Facebook page and a new Money Diaries bestseller.
We can only hope such tell-alls expand to provide a similarly candid look at the granular spending patterns of older generations. In the meantime, there are statistics that sketch the finances of aging Americans with a broad brush.
According to 2016 data compiled by the Bureau of Labor Statistics, the average “older household,” defined as one led by someone 65 or older, had an income of roughly $48,000 before taxes—and spent $46,000 of it.
Where does the money go? The biggest expense is for housing (averaging $15,529 annually). Spending on transportation ($6,846) and clothing, ($1,060) considered job-related expenses, decreases among this group as the number of workers in a household drops. Meanwhile, out-of-pocket expenses for health care ($5,766) climbs compared to younger households.
Another study that shows that older Americans are holding steady comes from the Transamerica Center for Retirement Studies. The 2,000 retirees surveyed named “getting by/covering basic expenses” as their top financial priority. Sixty percent of respondents said their standard of living stayed the same in retirement; 28 percent said it decreased and 10 percent indicated their standard of living increased.
Of course, the aging population is hardly homogeneous. There are multiple niches folded within the older demographic, with wealth and conspicuous consumption at the top of the scale and gnawing but often hidden poverty at the bottom.
They make up the fastest growing segment of the population, but there’s been little research about the finances of people 85 and older. Until now.
According to the federal Profile of Older Americans, the number of the so-called “oldest old” is projected to more than double, going from 6.4 million in 2016 to 14.6 million in 2040. That’s a whopping 129 percent jump.
In May, the Society of Actuaries (SOA) released an in-depth report that offers insight into the post-retirement financial experience of the 85-plus crowd.
“This group is not in the target market of financial services companies. They’re difficult to study because the typical online research done today won’t work with them,” explained Anna Rappaport, who chairs the Society of Actuaries Aging and Retirement Strategic Research Program.
“The most interesting finding about this group is how well they are doing. They are resilient, frugal and seem reasonably well satisfied,” said Rappaport. “Except for health care, their expenses not going up. They’ve adapted to spending at a level appropriate for their income. Their mindset is to want less, and at this age, they are just doing less.”
Previous research in the SOA’s 2015 Retirement Risk study revealed that about half of younger retirees felt unprepared to face “financial shocks,” significant but unplanned expenses related to home or car repairs and medical or dental bills that upend their budgets and drain reserves. These disruptions are far less prevalent in the most senior end of the demographic.
The oldest-old have also aged out of another life event that creates financial havoc—divorce. “The biggest change they experience with their marital status is going from being married to being widowed. This group is predominantly female from households where men were primary breadwinners and managed the finances,” Rappaport said.
One financial surprise cited was the cost of assistance in daily living. About a third of the elders get hands-on family help with transportation, meals and chores. The vast majority—86 percent—report getting no financial support from their families.
The SOA survey relied on in-depth interviews with elders and their adult children. Rappaport acknowledges that the inability to include individuals experiencing cognitive decline created a somewhat skewed sample.
“A study of that group is coming soon. Once that (cognitive decline) starts, it changes everything,” she said.
The finances of LGBT Americans in retirement swing widely, according to certified financial planner David Rae, who has a large number of gay clients in his Los Angeles-based practice.
Rae uses a barbell as a metaphor for the disparities among gay retirees.
“On one side are the very visible, successful people in our community. We see their fabulous lives on Instagram,” said Rae. “On the other side is the group that doesn’t get attention, who are living at or close to the poverty line. Many have faced a lifetime of discrimination.”
A statistical snapshot from Prudential’s 2016 report, The LGBT Financial Experience, found gays and lesbians earn less than their heterosexual peers and are less likely than the general population to be saving for retirement.
A report by SAGE (Services & Advocacy for GLBT Elders), finds older homosexuals are twice as likely to live alone, a risk factor for financial insecurity.
The legacy of the HIV/AIDS crisis has taken a toll on some gay men, diminishing their preparation for a post-work life. “For so long it was a death sentence. A lot of people didn’t think they would be alive when retirement came,” he said. “They spent in a way they wouldn’t have without that diagnosis. That attitude about spending seeped into the greater community.”
The unique financial challenges that lesbians face in retirement differ from those for gay men.
“In lesbian couples, theoretically there are two people who make 78 cents on the dollars, have higher health care costs and will live longer. Living longer is a good thing, but the money has to last longer and they’re at a disadvantage, income wise,” Rae explained.
But matrimony is creating greater security for LGBT seniors who tie the knot, allowing partners to qualify for spousal and survivor benefits and pool and share their wealth.
“We’re just a few years into this and couples haven’t had as much time to maximize their Social Security benefits. When we couldn’t legally marry, a lot of people didn’t take steps to plan together. These couples missed advantages that compound over time,” Rae said.
Aging While Poor
For millions of Americans, the term “golden years” is cruelly ironic.
Justice in Aging, a national legal advocacy nonprofit, counts 7 million seniors currently living in poverty, a number that is rising.
“Our organization started 40 years ago serving older adults who were poor throughout their lives,” said its executive director, Kevin Prindiville. “Now we see older adults who are experiencing poverty for the first time.”
Prindiville casts a jaded eye at ads pitching senior living communities and luxury golf vacations for hale and hearty baby boomers. He thinks the prevailing image of the affluent retiree denies the reality of millions of struggling seniors.
“The gap is growing between the haves and the have nots. A large number of older people who worked hard, saved and thought they would be fine are financially insecure,” Prindiville said.
Census Bureau figures identify Americans 65 and older as the only population group to see poverty rates increase between 2015 and 2016.
“The cost of housing and health care keeps rising. Pensions are smaller than had been promised and some have disappeared altogether,” Prindiville said. “Social Security is a bedrock, keeping 15 million older people out of poverty—but just barely. We have not strengthened or expanded Social Security and it’s not keeping up.”
The problem is especially pronounced among women, who are more likely to grow old in poverty; 10.6 percent of older women are poor compared to 7.6 percent of older men.
Women typically have accumulated less in Social Security, pensions and retirement plans due to the gender pay gap and more time out of the workforce for caregiving.
The gap widens for women of color. A briefing paper by the Institute for Women’s Policy Research concluded that 20.5 percent of older African-American women and 19.7 percent of older Latinas live in poverty.
Prindiville points out that statistically, the number of poor seniors is destined to surge. “Even if the poverty rate stays constant, just the larger number of people getting older means we will see more people in poverty,” he said.
“This age group can’t improve their financial outlook. The fact is, when you’re 70, there aren’t opportunities in the employment market that can put you on the path to financial security.”
Across the board, the finances of US retirees lag behind their counterparts in other developed countries.
According to the 2018 Global Retirement Index prepared by Natixix Investment Managers, Americans’ retirement security ranks 16th among 43 nations studied.
That score is based on 18 factors that include financial wellbeing, social programs, accessibility of health care and the level of income inequality. Seven of the top ten countries are in Europe, and Canada is ranked tenth in the sixth annual survey.