Let’s Talk Senior Poverty: A Growing Problem for the Aging

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A new report issued by the Census Bureau reflects a depressing reality for older Americans. Between 2020 and 2021, the official poverty rate increased for people who were 65 or older. That increase contrasts with a decrease in the official poverty rate for people younger than 18. The rate was unchanged for people between 18 and 65.

The official poverty rate is measured by pretax income. The Bureau also uses a supplemental poverty measure that accounts for government programs that do not count as income, such as nutrition assistance and stimulus payments. The supplemental measure also deducts certain critical expenses, including health insurance premiums and childcare costs, to determine available income. The supplemental poverty measure decreased for people younger than 65 but increased for older people.

The welcome reduction in child poverty is at least partly attributable to the federal government’s pandemic relief efforts, including the expanded child tax credit. While most seniors received stimulus payments, other pandemic relief efforts targeted children and the involuntarily unemployed rather than retirees.

Statistics reveal that, thanks to Social Security, people who were 65 or older in 2020 were less likely to be living in poverty than those who were younger than 65. In 2021, the gap in poverty rates had nearly vanished. The poverty rate for older Americans jumped from 8.9% in 2020 to 10.3% in 2021. More than 5.8 million older Americans lived in poverty in 2021, an increase of about one million since 2020. 

Why Is Senior Poverty Increasing?

Social Security benefits lift roughly a third of their recipients out of poverty. Yet rising healthcare expenses and disappearing retirement benefits may deprive older people of an adequate standard of living.

Poverty is particularly likely to affect senior women. Women who leave the workforce to provide caregiving to older family members often have difficulty returning to their former employment. Their loss of income diminishes retirement savings and, since Social Security benefits are tied to the highest income a worker earned, reduces the benefit that the caregiver will receive. 

Acting as an unpaid caregiver accelerates the process of aging into poverty. The income gap between male and female workers and the greater likelihood that women will be the victims of domestic violence also make women more likely than men to live in poverty during their senior years.

Reducing Senior Poverty

No simple solution will assure that all seniors enjoy an adequate standard of living. These suggestions draw upon and update a plan to reduce senior poverty that approaches the problem on multiple fronts:

  • Strengthen the safety net. Proposals to reduce Social Security benefits would be disastrous in a rapidly aging population. Solvency in the Social Security trust fund can be less painfully achieved by raising the cap on incomes that are subject to the payroll tax. Reducing Medicare cost sharing and expanding Medicaid for seniors who do not qualify for Medicare would help fight a leading cause of senior poverty: an inability to manage rising healthcare costs.
  • Update the Supplemental Security Income program. The poorest seniors who do not qualify for Social Security may be entitled to SSI benefits. While SSI was intended to lift seniors out of poverty, the program has not been updated in decades. A bipartisan bill to allow seniors to save more money without losing eligibility for SSI benefits would allow older people to enjoy greater economic security by building safety nets against unexpected expenses.
  • Expand programs that reduce healthcare costs. Medicare’s Part D Low Income Subsidy (also called Extra Help) helps cover the premiums, deductibles, and copayments associated with Medicare drug coverage. Making the coverage available to more seniors would reduce the financial stress associated with high drug prices.
  • Expand federal support for long-term care. Even seniors with long-term care insurance find it difficult to pay for assisted living facilities when insurance benefits are exhausted. Except in limited circumstances, Medicare does not cover nursing homes or other long-term care that seniors with disabling health conditions may need.
  • Strengthen the Older Americans Act. Currently funded through 2024, the Older Americans Act provides grants that states use to deliver social and nutrition services to seniors and their caregivers. Driven by state partnerships with profit-seeking businesses, costs of long-term services and supports have been rising sharply. Innovative solutions are needed to forestall legislative calls for reduced services.

Additional suggestions include: giving Social Security credits to caregivers, just as they are given to wage-earning workers; adding dental, hearing, and vision services to Medicare; and increasing funding for housing assistance programs.

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