Financial Independence for Older Adults
It would greatly benefit older adults, and in fact adults of all ages, to better understand the complexities of financial independence as a senior citizen, as well as the barriers that exist in attaining such stability. Equally, those who serve young, middle-aged, and older adults, such as social workers, would be better able to provide useful services by also building their knowledge base. Although they’re not financial managers, social workers can and do assist clients in working toward and maintaining financial independence through older adulthood.
It is possible, Zurlo adds, for an individual to have financial well-being without having financial independence. For example, in some couples, one individual may be less adept at managing finances and depends on their partner to manage the household budget. These individuals are not financially independent but may experience financial well-being; they do not feel financial strain nor do they worry about the state of their finances.
“When people don’t have much wealth or income in their working years, that tends to build. Either people develop wealth and assets, or they don’t,” she says. “There’s a lot of emphasis on financial literacy, but I also think you have to have the ability to accumulate. Some people don’t.”
Another factor that impacts preparing for financial independence is time away from work. Even a few years not earning and/or saving can derail a plan. This is most impactful for women, who are more likely than men to take time off to raise children.
“Caregiving is really enormous, and there’s research about the amount of money on average that women spend as caregivers,” Hounsell says. “Just going to the drug store and getting medication—you’re paying for it and not even thinking about it.”
Again, this is particularly of note for women, who experience higher rates of poverty in older adulthood. According to the Economic Policy Institute, 17% of women age 65 and older are in poverty, compared with 12% of men. They are also most likely to be alone. “Most men die married, and most women die single,” Hounsell says.
Other contributing factors include events such as COVID-19, in which millions of jobs were lost. Many won’t be able to recoup their savings once they’ve regained employment, and others won’t be able to get new work, particularly those nearing older adulthood.
Age discrimination can be a huge barrier for an older adult looking for new employment. Being laid off at age 55 may mean accepting significantly lower-paying job offers or simply retiring much earlier than planned. Either way, the impact to one’s savings and future financial independence is significant.
Barriers to Maintaining
While those older than 65 are eligible for Medicare, that coverage does not account for all expenses. “Traditional Medicare covers only 80% of costs,” Wilber says. Most older individuals have to purchase a supplemental insurance plan to cover the remaining fees. And expenses, such as long term care facilities, are not covered at all.
“[Medicare] covers rehab if you have to get better after a surgery, but if you need to stay in a facility or you need home- and community-based services, it doesn’t,” Wilber says. Again, supplemental insurance plans may help there, as would long term care insurance. However, Wilber notes that only 5% to 10% of older adults have long term care coverage. Thus, when an individual requires those services, the cost—whose national average is $75,000 annually, according to Piscitello—is out of pocket.
Additional expenses can include housing costs—not just the mortgage, maintenance, and utilities but also updates to the home that may allow for an older individual to continue aging in place. For example, the addition of a chairlift or the conversion of part of the first floor to a bedroom and bathroom may be necessary as an adult’s physical abilities begin to decline.
Debt is also an expense to be considered; older adults, like most adults in the United States, carry it. According to the Survey of Consumer Finances, 60% of households headed by an adult aged 65 or older had debt in 2016. The debt comes from a variety of sources, including medical expenses, credit cards, and housing costs. However, in recent years, that debt has also branched into other areas.
“What we’ve found recently is that student loans are becoming a financial burden for older adults. They are often repaying the debt incurred by their grandchildren’s college education,” Zurlo says.
Fraud and Abuse
Exploitation such as this is so prevalent that bank tellers are trained to watch for signs that an older adult is being victimized. “Frontline bank tellers have been increasingly trained, and in California bankers are supposed to report suspicious activity,” Wilber says. “The problem with some of this is, what is suspicious activity and what is someone acting on their own volition?”
And it may be that even when a crime is being committed, the victim may not want to admit it. “If it’s a child or even a grandchild, oftentimes the older adult has shame and embarrassment and chooses not to call the authorities and make a formal report. It’s very challenging,” Zurlo says.
That shame can extend to exploitation by strangers as well. It is not uncommon for older adults to receive calls and e-mails from predators pretending to be a loved one in need. They ask for money and once they receive it, ask for more. Predators may also request information that allows them to access accounts themselves.
“When young adults marry, their priorities change,” Zurlo says. “First, they save for a house. Then they have added expenses by rearing children and saving for college. Start saving early and be consistent regardless of life changes.”
When this strategy is adopted, adults are able to continue through older adulthood with less worry. Hounsell points to her aunt, who bought (with her own funds) a rental house shortly after getting married and was able to use the income from that purchase to build a more solid financial foundation.
Besides saving and making investments early, adults also have to willingly discuss finances with their partners, their parents, and their children. It’s a difficult conversation—talking about finances in older adulthood is essentially talking about death. How long will one live? What will the path toward death cost?
It’s uncomfortable. In fact, Piscitello cites a study that found parents would rather have the sex talk than the financial version. Yet, that discussion is crucial to being prepared for the expected and unexpected expenses of older adulthood. Piscitello primarily works with seniors who need a higher level of care. Often, their family members have reached out for assistance in figuring out how to help a parent continue to age in place or secure funding for moving to a long term care facility.
“When a caregiving crisis comes up, adult children often don’t know what mom and/or dad have done. They want to get a handle around, ‘What do we have; what are our resources?’” Piscitello says.
Not knowing the answer to those questions ahead of time can delay needed care and have financial impacts not just for the older adult but also for the adult children.
Social Work’s Role
Social workers are already involved in watching for, reporting, and working with older adults on possible abuse cases, including those involving financial exploitation.
But where social workers may have the most impact in financial independence for older adults is in the roles that are not clearly connected to it. Any social worker serving an adult of any age with the ability to discuss financial matters should talk about the economics of older adulthood. “Even if you’re working with middle-aged adults, you can help them prepare for later life,” Zurlo says. “Planning for a healthy and happy later life starts in young adulthood.”
To best do that, social workers must build their knowledge of finances and financial independence. “Understand the issues and values, have tools like the National Council on Aging, and understand the policies,” Wilber urges.
And above all, she says, listen. Use the communication skills social workers rely on to hear where a client is coming from, where they want to be, and what resources they have to get there. The client may surprise you. For example, Wilber recalls consulting with a social service agency that worked with an older woman claiming to have thousands of dollars stashed under her mattress. The social workers dismissed the notion, and yet when she moved out and someone looked under the mattress, there was the money.
While those circumstances won’t be the norm, they will be the case for some. And every little bit counts. After all, scientists believe that the first person to live to 150 years is already alive. How will that individual be able to afford that?
— Sue Coyle, MSW, is a freelance writer and social worker in the Philadelphia suburbs.