A new analysis by the LeadingAge LTSS Center @UMass Boston and the National Council on Aging finds that 80 percent of older Americans—47 million—continue to be unable to sustain a financial shock such as needing to pay for long-term care services and supports (LTSS) or the loss of income due to divorce or widowhood.

The 80%: The Continued Toll of Financial Insecurity in Retirement,” looks at the total net value of all assets—housing, retirement accounts, income, and savings—of people aged 60 and older and compares that with the cost of two years of in-home long-term care services and nursing homes. The 80 percent of older Americans who would struggle to pay for a nursing home, even if they spent all their savings, includes the 60 percent who couldn’t pay the full bill even if they sold their homes as well.

“When you think about these potential costs, and then look at the entire picture of what is available to people in terms of their own resources and government assistance, you realize that the most vulnerable here are middle income Americans, who have the most to lose,” says Marc Cohen, PhD, co-director of the LeadingAge LTSS Center at UMass Boston and one of the report’s authors.

Joining Cohen on the study were Jane Tavares, PhD, senior research fellow at the LTSS Center; Molly Wylie, a UMass Boston gerontology doctoral candidate and NCOA Equity in Aging research fellow at the LTSS Center; and NCOA researchers Rocki Basel, PhD, and Susan Silberman, PhD, senior director for research and evaluation.

“It is unacceptable that nearly all older Americans are one crisis away from plunging into poverty after working their entire lives and often saving a nest egg that is then wiped out by the cost of care,” says Silberman.

Drawing from the national Health and Retirement Study data, the report includes three key findings:

  • Most older Americans continue to lack sufficient resources to brave a financial shock such as a significant long-term care need, health issue, or loss of income due to divorce or widowhood. Despite adults’ preference to age in place, 60 percent of adults would be unable to afford two years of in-home long-term services and supports, which means that aging in place would likely be out of the financial reach of those with such needs.
  • A substantial percentage of older adults do not have adequate income to live independently in the community without some assistance. Specifically, the 2018 HRS data showed that 45 percent of those 60 and older had household incomes below the Elder Index—a measure developed by UMass Boston gerontologists of the income older adults need to meet their basic living needs. Of the 80 percent who could not absorb a financial shock, 55 percent had incomes below the Elder Index in 2018.
  • With the exception of the bottom 20 percent, many older adults hold most of their financial assets in the property value of their homes. With fewer young adults owning property compared to the Baby Boomer generation at their age, it is unclear how property ownership will transition in the coming decades and how this will impact the ability to absorb financial shocks for future older adults.

Because Medicare does not cover LTSS costs, older adults and their families must shoulder this financial risk or spend down most of their savings and assets to qualify for social safety net programs such as Medicaid. NCOA is advocating for public policy solutions to address this crisis, including improving access to home and community-based services under Medicaid; providing additional assistance to family caregivers, such as tax credits and paid medical leave; and promoting retirement savings among lower and middle-income workers.