Retirement Security in an Uncertain World: Can Women Afford to Grow Old? Jacqueline L. Angel, Ph.D. , Stipica Mudrazija, MPA

Rapidly rising health care costs and the effects of the lingering recession have put older Americans at risk of falling off their own personal fiscal cliff. One-third of retirees are already in or close to poverty. Any reduction of entitlement programs would have consequences for their well-being, particularly for older women who disproportionately rely on the programs to meet their financial and health care needs. There is a real possibility that a large fraction of baby boomer women may outlive their resources and find themselves at high risk of financial fragility and dependency on children or the state. Yet, so far, policy planning has failed to take this gender crisis into account.

Historically, retirement security has customarily been provided through marriage. Many women, especially those born into pre-baby boom cohorts, never worked outside the home or did so only part time. Dependence on their husband’s income and health benefits continued into the retirement years.In the final decades of the 20th century, this pattern changed as divorce rates continued to climb and women became increasingly responsible for their own old -age security. The magnitude of the difference is striking. In 2011, the U.S. Census Bureau data show only 6 percent of couple households below poverty compared to 31 percent for female-headed households.

Our research recently presented at a national conference of aging experts reveals that financial insecurity is a significant problem for certain subgroups of women. Restricted employment opportunities and low educational levels mean African-American women are less likely to have employment-based retirement plans than non-Hispanic white women, and Mexican-origin women are far less likely than any other group to have coverage from any source. 

Furthermore, the lower earnings capacity of many African-American and Hispanic husbands means if a husband dies before his wife, she is left with little wealth and no long-term financial security. The situation only worsens over time. Many widows experience a considerable loss of assets and a long-term financial deterioration the longer they are widowed, as do those who are divorced. In 2008, approximately 40 percent of African-American and Hispanic women 65 and older who lived alone were in poverty. Gender, race and cultural disadvantages in retirement coverage have important implications for financial security. A silver tsunami of women are now on the verge of retiring. 

Can employment after retirement avert the impending financial difficulties for women? This depends largely on health and income-related constraints. The prospects look bleak for many women who wish to delay retirement and continue employment, especially for Latinas and those with limited education. For example, research from the Center for Retirement at Boston College determined that low-educated women and men had inferior job prospects than highly–educated workers, partly because they were viewed less favorably by employers. Furthermore, although many low-income women may not be able to afford to stop working, they may be physically or mentally unable to continue, even at a relatively young age in terms of retirement. Among women, African-American and Hispanic blue-collar workers in poor health have the lowest self-rated probability of continued work after age 65.This likely makes them the most vulnerable to proposed increases in the normal retirement age since they are least likely to amass sufficient housing equity or pension wealth. In fact, it is possible that declining health will become the primary motivation for retirement, rather than age. We also know little about the social implications of longer work careers in the presence of high unemployment.

The extensive and rapid changes we have witnessed in marriage in recent decades mean that the old rules have changed, and women’s financial situations will vary greatly based on many individual, cultural and social factors. All this is compounded by the fact that employers are increasingly shifting financial risks and responsibilities to individuals. Given baby boomer women’s favorable life expectancy in all racial and ethnic groups, and the likelihood that government will not be able to provide adequate retirement benefits in the future, the United States could become a nation of impoverished older women. This is a situation we should work hard to avoid.

In a Nation of Immigrants, Many Immigrant Older Adults Live Under Economic Insecurity, Yunju Nam, PhD

The United States is often called a “nation of immigrants.” Certainly, immigration has been an integral part of the U.S. society throughout its history. It is undeniable that population growth in the U.S. depends largely on a growing number of immigrants and their children. According to the U.S. Census, the number of foreign-born individuals is at an all-time high: 40 million in 2010, an increase from about 32 million in 2000. Now, foreign-born individuals comprise 3 percent of the U.S. population, and the number is expected to continue to grow.

It is, then, somewhat ironic the U.S. has developed few public policies for immigrants. Policy discussion has focused mainly on immigration: how many immigrants should be admitted and what types of immigrants should be permitted in the country. What should be done in order to facilitate immigrants’settlement and adjustment in the new country is rarely discussed. Except for a few social benefits and services provided to refugees for the first few years in the country, the U.S. government has kept a laissez-faire approach to immigrants. In contrast to the Canadian government, which has played an active role in assisting immigrants with integration into their economic, political, social, and cultural lives, the U.S. government has assumed that immigrants and their families should take care of themselves.

Although many immigrants and their families have achieved their American dream with little public support, a substantial proportion of them are struggling in their new country. Due to labor market discrimination and a lack of recognition of foreign education credentials, immigrants tend to earn less than their native counterparts with comparable educational  attainment and skills. The lack of access to mainstream financial services and credit markets hampers financial integration among immigrants: the percentage without bank accounts is much higher among immigrants (32.3%) than native-born individuals (18.5%). Complicated bank systems, inadequate language services to non-native speakers of English, and documentation requirements (e.g. social security number) are often mentioned as barriers to mainstream financial systems among immigrants. As a result, immigrants are more likely to use alternative financial services such as check-cashiers, which impose higher fees than mainstream services and do not improve credit scores.

Immigrants’ situation in the labor market and financial system likely put immigrant older adults under economic insecurity. Cumulative disadvantages experienced by immigrants throughout their lives in the U.S. bar immigrants from preparing for old age. A substantial proportion of older immigrant adults do not receive social security benefits, in comparison to almost universal coverage among older native adults (71.2 % versus 91.0% in 2007, respectively). At the same time, immigrant older adults are less likely to receive a pension (21.9% in comparison to 40.0% among native older adults) and investment income (20.1% versus 34.1%). As a result, the poverty rate of immigrant older adults’ is much higher than native older adults (16.8% versus 9.8% in 2009). These statistics indicate the economic insecurity confronted by a substantial proportion of immigrant older adults.

Some may argue that it is not the public’s (or the government’s) responsibility for immigrants to build up economic security. They may assert that immigrants came to the U.S. of their own will and that they should take care of themselves. But it should be noted that everyone has the right to economic security, and it is public responsibility to remove barriers to financial integration for everyone, especially among vulnerable populations with unique obstacles. It should be recognized that many immigrants have contributed to the U.S. economy as skilled workers or unskilled workers. More importantly, it would be cost-efficient to facilitate the economic integration of immigrants rather than leaving them as they are. Government programs for immigrants’ financial integration would likely prevent immigrants from depending on public assistance programs after retirement.

Keeping this in mind, what should we do? Current understanding of immigrants’ long-term economic security suggests the following policy intervention: First, it is urgent that were move institutional barriers to financial incorporation and asset-building among immigrants. For example, government guidelines on alternative identifications (instead of social security number) would encourage immigrants to open bank accounts, to use mainstream financial services, and to apply for mortgages. Second, asset-building programs for vulnerable immigrant older adults should be developed so that they are able to save for their retirement. Asset-building programs may provide financial education and financial planning services to facilitate immigrant older adults’ savings.

Reducing Disability’s Insecurity, Michelle Putnam, PhD

People with disabilities and their families commonly experience tremendous economic insecurity. The reason for this is clear. First, a high proportion of people with disabilities have annual incomes below the poverty line – 28% of those between ages 21 and 64, according to the U.S. Census Bureau’s 2011 American Community Survey. Second, the overall employment rate of people with any kind of disability was only 33% (compared to 76% for persons without disabilities). And third, out-of-pocket health care and support services costs generally consume a large share of household income of families that include someone with a disability.

We have known for over a decade that disability-related support programs need modernization. However, as a nation, meaningful discussions about how to restructure disability programs so disability does not result in financial ruin are few. Despite the difficult political landscape, it is time to have these discussions.

Most Americans will confront disability-related health and home care costs as they grow older and abruptly realize (if they haven’t already) that private insurance and Medicare have very limited coverage of long-term supports and services. Medicaid is the best long-term care insurance available, but requires those individuals it insures to be income poor. People with disabilities not insured by Medicaid (young or old) tend to spend through their own or their families’ savings paying for care services, making the financial insecurity of disability a concern of the entire family.

There are things we can do to support financial security that would benefit persons of all ages experiencing disability. For example, we know that disability policies are uncoordinated and tend to make returning to work complicated– we can coordinate them. We also know that health care costs and lack of health insurance or insurance coverage restrictions are high burdens for families– we can work to reduce these financial burdens. And importantly, we know that disability policies have rarely focused on families as an economic unit or on institutional factors that act as barriers to financial security – like difficulty in obtaining bank accounts or ensuring workplace accommodations – so we can widen the focus of interventions.

Innovation is required to help people with disabilities retain and grow the financial assets. Limited access to employment-based financial products like 401Ks might be supplemented by individual development accounts – matched savings for dedicated purposes including assistive technology, additional education, and home down-payments. Credit unions might specialize in working with people with disabilities, offering products with low fees, specialized supports, and financial planning based on long-range care needs as well as life interests. Public programs like Medicaid might support stronger consumer-direction of funds so that people with disabilities can prioritize payment for the things they need the most to ensure both health and financial security.

The rationale for changing our disability policies should be national self-interest. Financial insecurity related to disability is a risk for everyone, young and old, and our public programs have been doing a poor job of eliminating our exposure to it.

The Sleeper in the Fiscal Cliff Deal, Jennifer Greenfield, PhD

A sleeper in the fiscal cliff deal could have important implications for older adults and their families. Buried in the final pages of the American Taxpayer Relief Act of 2012 (the “Fiscal Cliff” deal) is the repeal of the CLASS program. CLASS, a national long-term care insurance program, was written into the Affordable Care Act in 2010, but scrapped in 2012 after HHS determined that the program could not be viable as written. At issue was the fact that – unlike Medicare – enrollment in CLASS would be voluntary, but the program itself would be held to the same long-term solvency standards as Medicare. The GOP has been anxious to repeal CLASS from the start, but long-term care advocates have fought the repeal, arguing that the program could be salvaged with minor legislative tweaks.

In place of the CLASS program, the Taxpayer Relief Act creates a Commission on Long-Term Care, which will begin work in February and report to Congress by August. This is not the first time Congress has assembled such a commission – in fact, in 1990, the Pepper Commission issued an important report calling for comprehensive health care reform, including reform of our country’s long-term care system. The CLASS Act was as close as we’ve yet come to tackling our long-term care crisis. Its repeal leaves us with no immediate prospects for dealing with this urgent issue – unless the new commission develops comprehensive legislation and Congress works quickly to pass it.

Many American families are all too familiar with the challenges of long-term care. Nearly 50 million adults provide direct support for a family member or friend who requires personal assistance with daily tasks such as bathing, eating, or getting dressed. Increasingly, family caregivers are assigned complex medical tasks like changing catheters and IVs or managing medications. With state and federal budgets stretched thin, fewer supports are available to caregivers, such that many feel overwhelmed and under-trained for their caregiving roles.

Many caregivers balance work responsibilities with caregiving, and the stress can have significant impacts on their earning ability. According to AARP, 42% of American workers have some caregiving responsibility, and with an aging population the number will increase. Caregiving causes many workers to cut back on hours worked, take more sick time, and sometimes quit their jobs altogether. Employees report that the stress that accompanies caregiving decreases their productivity on the job. Since many caregivers experience health problems as a result of their caregiving responsibilities, their productivity may be further compromised. Thus, caregiving can result in reduced earnings, forgone promotions and raises, and career interruptions that may cost the family tens or even hundreds of thousands of dollars over the long-term.

Even as caregivers earn less, they may face increased expenses. Some help the care recipient with household bills or payments for a home health aide or nurse. While most people who need LTC have income from pensions or Social Security, many ultimately qualify for Medicaid coverage, which requires almost complete impoverishment in order to receive Medicaid-covered services and supports. Families often fill in the gaps by helping with home repairs, property taxes, and even everyday expenses like food and copays. Employers feel the pinch as well. Caregiving costs businesses as much as $34 billion in lost productivity, increased supervision demands, and hiring costs. It may cost even more because of increased health insurance utilization and resulting premium increases. Employers have found that support programs for workers with caregiving responsibilities can help, but these also come with a pricetag.

In short, long-term care is very expensive, even when no one is being paid to provide the care.

The CLASS program had the potential to make a difference: it would have provided a $50 to $75 per day cash benefit that could be used to compensate caregivers, make home modifications, or hire home health aides. Making the program voluntary was the death-knell for CLASS, but now the pressure is on for the new Commission to develop a more viable alternative. The fact is, doing nothing is not an option. Long-term care has been ignored by Congress for too long, and though comprehensive reform will be expensive, the cost of the status quo is not sustainable for families, businesses, and states. As the Pepper Commission warned 23 years ago, a crisis is upon us. With 10,000 Baby Boomers reaching age 65 every day, the demand for long-term care is only going to increase over the next 30 years. The time to act is now.