As housing costs consume sizable shares of American seniors’ income, these expenses are having an adverse affect on the financial security of many elderly households, according to a recent analysis from the Urban Institute.
The Urban Institute brief examines the financial challenges confronting low-income adults, with a particular focus on housing costs in 2013. Data derives from the American Community Survey and the Consumer Expenditure survey, both of which are fielded by the U.S. Census Bureau.
Based on these data, 14% of older adults—6.5 million people in 2013—do not have enough income to meet their needs. Although most of the income from these individuals comes from Social Security, the Urban Institute’s analysis finds that “too much” of it is spent on housing.
In 2013, Social Security accounted for 72% of the family income received by adults ages 65 and older with family incomes below 125% of the Federal Poverty Level (FPL), according to the Urban Institute. By contrast, Social Security accounted for only 49% of 2013 income for older adults with family incomes between 200-399% of the poverty level, and only 23% of 2013 income for older adults with family incomes of 400% or more of the FPL.
These higher-income groups, the report says, received substantial payments from earnings, employer-sponsored pensions and investments.
Although health care costs garner most of the attention when it comes to discussions of seniors’ financial security, older adults spend much more on housing. These costs include not only shelter, but also mortgage interest and charges, property taxes, home maintenance and repairs, rent, utilities, homeowners’ and renters’ insurance.
In 2013, households that were headed by adults ages 65 and older devoted 28% of their spending to housing—more than twice as much as they spent on health care (12%). Housing costs are even more significant for low-income seniors, who devoted 36% of their household expenditures to housing in 2013.
As a share of income, housing expenditures were also high, with households head by adults ages 65 and older having spent 23% of their income on housing in 2013.
The implications associated with seniors’ high spending on housing are serious, especially when considering that seniors who spend more than half their income on housing spend significantly less on food and health care than their counterparts with lower housing expenses, states the Urban Institute.
Meanwhile, the onset of aging and mobility-limiting health problems at older ages only exacerbates the problem by creating additional housing-related financial concerns.
Because of these reasons, the Urban Institute suggests more policy initiatives are needed to help families cover health care expenses and improve financial security at older ages.
“Probably the most important step that Congress could take to improve financial security at older ages is to shore up Social Security’s long-term finances, given the vital importance of the program to low-income seniors,” writes the Urban Institute.
Read the Urban Institute report.
Written by Jason Oliva