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What Middle Income Older People Need Most

Jess Stonefield March 30, 2020
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If middle income older people had an extra $1,000 per month, how would they spend it?

If you’ve been following politics the past few months, you’ll be familiar with the term UBI. Former Democratic presidential candidate Andrew Yang made UBI—universal basic income—the platform of his campaign, promising every adult American $1,000 per month in order to improve economic disparity in the country. Though Yang left the race for president, the concept of UBI—a concept promoted throughout history by the likes of Thomas Paine, Martin Luther King, Jr., and Elon Musk—has recently caught steam.

This begs the question: if older middle income people had an extra $1,000 per month, how would they spend it? And how would it change the longevity marketplace as a whole?

Elaine Weiss, lead policy analyst for income security at the National Academy of Social Insurance (NASI), recently shared her thoughts about these questions.

Understanding the New Middle Class

To understand how middle income older people would use extra money each month, Weiss says, we first need to understand what “middle income” means in 2020.

“Being able to live on a single income, purchase a car, and send your kids to college was a reality in the 1950s and 60s,” Weiss says. “But it has little resemblance to middle-class living today.”

For one thing, she says, retirement security is declining. In the past, workers relied on a three-pronged system of pension funds, retirement savings, and social security to make ends meet as they aged out of the workforce. Today, each of those buckets of savings is in decline. For instance, in 1979, 38% of private sector employees had traditional pension plans. Today, just 14% of workers have access to them. In fact, in working households aged 55-64, 62% have not accumulated retirement savings greater or equal to their annual income. Further, half of adults aged 65+ who live alone don’t have the money to cover their basic needs.

Coupled with stagnant earnings, rising cost of living, skyrocketing healthcare costs, and growing debt, middle income older people are facing significant financial pressure. And, Weiss says, thanks to a changing employment market, the further from retirement one is, the worse off their experience will be.

“The truth is, the middle class is not living as well as you think,” she says.

How Would Middle Income Older Americans Spend $1,000?

To be honest: the answers aren’t sexy.

First off: debt. As noted above, most Americans haven’t saved enough. But a greater problem may be that they have also accrued a massive amount of debt. Consider the following.

  • Americans in their 60s had $2.16 trillion in debt in Q2 2019. This compares to $1.47 trillion in debt in Q2 2008.
  • Those 70+ are in twice the household debt than they were during the financial crisis of the late 2000s ($1.16 trillion). Eleven years ago, that number was $0.54 trillion.
  • Median total consumer debt of households headed by someone 65+ in 2016 was $31,300 – 2.5 times what it was in 2001 and almost 4.5 times the level in 1989. 
  • Around 2.8 million American adults 60+ carry student loan debt (largely for their children), and the number is increasing—literally quadrupling since 2005.

With these types of numbers, it’s clear many middle income older Americans would simply be using the extra cash each month to pay off the bills they’re already carrying.

Another likely answer: healthcare.

While debt itself is a concern, the greater problem is that many must go without other greater needs because they’re paying off the vast amount of debt they’ve already accrued. For instance, 39% of older student loan borrowers said they’d gone without healthcare needs, such as prescriptions or medical visits, to afford the student loan payments they’ve taken for their children.

“Many older people are trading off healthcare for other things,” Weiss says. “An extra $1,000 per month may mean they could go to the doctor this month or fill their prescriptions, rather than waiting for their symptoms to pass.”

Another likely answer: daily emergencies.

In a widely publicized report published in 2018, it was shown 40% of Americans wouldn’t be able to come up with $400 for an unexpected emergency. The average cost of an emergency room visit in 2017: $1,389. For an older American, a trip or fall could not just wipe out savings but accrue even more debt. Thus, an extra $1,000 per month is more likely to relieve the stress caused by a surprise flat tire or speeding ticket than it is to go toward a night out on the town.

The Final Verdict on UBI: It Isn’t Enough

While $1,000 in extra income would definitely help older Americans in the middle income bracket, Weiss says greater systemic changes are needed to help alleviate the debt and healthcare burden many are carrying. Specifically, UBI should be looked at under the greater umbrella of retirement security.

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Jess Stonefield

Jess Stonefield is a contributing writer on aging, mental health and the greater longevity economy for publications such as Changing Aging, The Mighty and Next Avenue. She is passionate about impact investing and the greater concept of “equitable equity”—spreading wealth to all levels of our society. She is a communications expert for Senior Living Fund.

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