A recently issued report highlighted the growing problem of poverty among senior citizens. The Employee Benefit Research Institute (EBRI) provided a detailed look at poverty rates among people who are at least 50 years old. The changes in those rates from 2001 to 2009 are surprising.
Among those aged 50 to 64, poverty increased from 9.1 percent in 2001 to 12.3 percent in 2009. This is the time when many are getting serious about retirement planning and if one in eight people of this age are facing poverty, they will be unable to prepare for a secure retirement.
The impact of Social Security benefits seems to help those who do retire to meet minimal financial concerns. The poverty rate among those who are between the ages of 65 to 74 also rose over that time frame, from 8.4 percent to 9.4 percent, but is lower than for the younger age group.
Why poverty is rising among seniors
Mounting medical costs seem to reverse those gains as individuals grow older. In 2009, 10.7 percent of those between the ages of 75 and 84 were living on an income that was below the poverty level. This was up from 8.8 percent of that age group that lived in poverty eight years earlier.
The only age group seeing a decline in poverty levels was the hardest hit. For those over the age of 85, 14.6 percent lived in poverty in 2009, down from the 15.9 percent in 2001.
The EBRI study noted several causes for the troubling levels of poverty among senior citizens. Personal savings may be depleted over time. If a spouse dies, Social Security benefits that the couple relied on often drop sharply.
As resources and income decline with age, medical bills tend to rise, adding more pressure to budgets for retirees who have relied on fixed incomes for decades.
Many begin retirement with low savings because they were raising a family and meeting the expenses associated with those obligations. Raising a family is often emotionally rewarding and many take a great deal of personal satisfaction from this accomplishment, even if the financial rewards are not obvious at first glance.
For many, raising a family includes making a monthly mortgage payment. Over time, many retirees find they have paid their mortgage off, or at least greatly reduced the balance due. This expense could become an asset in retirement.
A reverse mortgage unlocks the value of your home equity without creating a monthly payment that could stress a fixed budget. The income offered by a reverse mortgage could be the difference between getting by and living comfortably for many retirees.
Homes are traditionally non-income producing assets, but a reverse mortgage changes that and could help reduce the stark poverty statistics that are the reality of retirement.