Jun 13, 2016

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Tool measures income needs of older Coloradans

by | Jun 13, 2016

The Colorado Center on Law and Policy largely focuses its advocacy efforts on adults in their working years. But because of the increasingly important and varied roles older adults play in families, and the importance of saving money with retirement in mind, it is critical to include the challenges facing older Coloradans under the economic-security “umbrella.”

The road to self-sufficiency and economic security should be viewed as a continuum that doesn’t end at age 65. An important part of reducing poverty is passing assets – like a home, for example – down from parent to child. Because children’s economic wellbeing is intrinsically linked to their parents’, it is critical that we take an intergenerational approach to alleviating poverty. That means implementing public policy that will allow people to reach economic security in their prime working years, save money with the aim of being able to comfortably retire, and receive the care and services they need in their advanced age.

Closing the gap between senior incomes and economic security requires preservation and increase of seniors’ incomes from sources such as Social Security, pensions and employment. Where security gaps persist or seniors’ future ability to retire is under threat, CCLP and its partners in recent years advocated for policies that would expand access to older worker training and employment programs, food assistance, prescription medication assistance, home- and community-based long-term care, senior housing and other public assistance programs that allow seniors to remain independent and age in their own homes and communities.

To that end, CCLP is excited to release the Elder Economic Security Standard Index for Colorado 2015. This tool can be used to measure the income retired older adults need to meet their basic needs. The Elder Index defines basic needs as those essential to health and safety — housing, food, transportation, and health care — and miscellaneous personal and household needs.  It provides an accurate measure of the cost of living for people over 65 in all Colorado counties. Seniors with incomes below the local Elder Index are more likely to make difficult spending choices, to go without one or more basic need, and to have trouble remaining in their homes as they age and/or their health declines.

Too many older adults experience financial instability. One fourth of retired adults live on social security alone, allowing them to subsist only slightly above the federal poverty level (FPL). In Colorado, seniors’ basic income needs far exceed the FPL and vary greatly — between $17,268 and $52,776 per year depending on location and housing type — according to the report.

In order to have financial stability in later years, it is critical to begin saving during prime working years.

According to AARP, 49 percent of adults age 46-65 say that they are struggling to save for retirement. Lack of retirement savings can lead to financial instability, and can also be a significant burden on family members. The Pew Research Center reported that 75 percent of adults in the U.S. believe we have a responsibility to provide financially for aging parents if they need help.

Nearly 30 million American households are providing some form of support – financial or with day-to-day care – to an aging adult, and this number is expected to grow dramatically over the next two decades. While this is a positive trend in many ways, it can take a significant toll on family finances. The MetLife Mature Market Institute found that financial impact cost family caregivers an average of $566,443 over the course of care.

On the other hand, it is important to acknowledge the role that seniors play as the financial backbone of many families. Because of stagnant wages and skyrocketing living costs, adult children are increasingly relying on parents for financial support.  A study by Merrill Lynch used the term “perpetual parenthood” to describe this dynamic.

While parents of adult children and grandparents may be willing to help out financially, it can set a dangerous precedent for their own economic security. For most adults approaching retirement age, this one-time and/or ongoing financial assistance is unanticipated, and may be drawn from existing savings rather than steady income streams. If an older adult dips into their retirement savings, they may have no opportunity to recoup these expenses. According to a survey by AARP, 67 percent of baby boomers say they would feel obligated to financially support their adult children if asked and 57 percent reported that they would be willing to do so even if it threatened their comfort and security in retirement.

Older adults play increasingly diverse roles in families. With the rise of nontraditional family structures, grandparents often step in to fill gaps in caring for children. Economic insecurity as a result of the Great Recession also increased the prevalence of multigenerational households. Nationwide, 7.8 million children live with a grandparent, and 2.6 million live in homes where a grandparent is the primary caregiver. Of households where a grandparent is present, nearly 1 in 5 is in poverty.

The role of grandparents can be critical in the attainment of self-sufficiency of non-retirement age parents. Recruiting grandparents as caregivers is one of the most common workarounds for families living on the edge of self-sufficiency. A single mom with an infant and a preschooler living in Larimer County, for example, can expect to spend around $1,975 on childcare per month. That is more than a third of her budget. If her parents are able to care for the children, mom is free to work more productively without worrying about childcare options, dedicate money saved to other things, and focus on savings or getting more skills training – all of which will better her self-sufficiency.

Protecting and expanding seniors’ income sources and strengthening the services and care available to older adults so they can live and age comfortably is crucial to supporting the financial stability not only of retirees, but also their adult children and young grandchildren.

By viewing the journey to self-sufficiency as a continuum, we take a more effective, holistic approach to reducing poverty. We hope that the Elder Index will help to guide policy change by identifying the most significant living costs for elders in Colorado, and calling attention to the groups struggling most to make ends meet.

 

  • Aubrey Hasvold

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