Blog Harvey A. Friedman Center for Aging

The financial vulnerability of older adults

Written by Nancy Morrow-Howell, PhD, MSW, Director of the Harvey A. Friedman Center for Aging at the Institute for Public Health and Bettie Bofinger Brown Distinguished Professor in the Brown School

There is a widespread belief that all older Americans are financially set, living their retirement years in relative comfort, able to enjoy their leisure time. It is true that the current poverty rate among older Americans is lower than that among children, thanks to the federal programs of Social Security and Medicare. But not all older Americans are financially well off, and some face extreme financial hardship.

Many more live on the edge—one medical event or housing problem away from impoverishment. The most financially vulnerable include ethnic minority and immigrant older adults, those with a disability, and those in need of long-term care. And the financial security of the Baby Boomers is very precarious—one third of current workers aged 55 to 64 are like to be poor or near poor in retirement, given current savings rate. (Learn more)


My colleague Margaret Sherraden and I just finished a new book, titled Financial Capability and Asset Holding in Later Life, published by Oxford University Press. We highlight the financial vulnerability of particular subgroups of the older population and the importance of a life course perspective in not only understanding but improving late life economic circumstances. As Shanks and Leigh review in this new book, African Americans have less retirement savings than any other racial group, with only one third of African American workers having more than $25,000 in a retirement account. Other authors in the book review the low income and asset holding of older Hispanics, Native Americans, and immigrant populations—attributing this economic insecurity to low education and poor health in earlier years as well as a history of low-paying jobs with no opportunity to participate in retirement savings plans. Putnam describes how disabled individuals end up poor because “simply put, disability is costly and financially disruptive.” She reports that the poverty rate for older adults with disabilities is twice as high as that for nondisabled counterparts.

The older population is disproportionately comprised of women because females outlive males. Thus, they are at increased risk of outliving their retirement savings. Plus, women have less retirement income and savings to begin with. They make less money than men in the workplace and are less likely to be in jobs with benefits and pensions. Further, women make up a disproportionate share of the caregiving workforce, and this unpaid work creates a double economic loss: care of the vulnerable relative carries expenses and limits the caregiver’s opportunity to participate in the workforce. Older women also experience higher levels of disability than older men. Bottom line, older women are poorer and sicker than are older men. We must pay attention to the gendered nature of late life financial vulnerability.

Life course issues clearly lead to economic insecurity in later years. Contributing factors include low educational attainment, low-paying jobs that lack pension coverage, and disrupted work histories. Further, poorer health or disability across the years not only dampens financial standing, it leads to higher medical and long term care needs in later life. Clearly, we cannot fix the problem of late life financial insecurity when people reach later life—solutions must be viewed from a life course perspective.

In the last chapter our book, we provide recommendations to improve the financial situation of people in later life. These include:

Build Financial Capability of Individuals and Households

  • Maximize use of public benefits (e.g., those from Social Security and Medicaid), and private resources (e.g., home equity in poor households)
  • Incorporate financial education into school curriculum at all levels from prekindergarten through post-secondary education, and incorporate it into the workplace as well
  • Provide financial planning, practical advice, and guidance as needed throughout the life cycle but especially at key financial decision-making moments, such as when people borrow for college, have children, or plan for retirement

Build Capacity of Financial Institutions

  • Offering multiple safe and progressive options for individuals to connect to financial services, beginning this with very young children, and continuing across the life course
  • Increasing use of automatic financial features so that people participate unless they actively decline and employing inertia (the widespread tendency to do nothing) to peoples’ advantage
  • Increasing the cultural relevance and consumer-friendliness of financial services for older populations, especially for older racial and ethnic minorities and for older immigrants

Develop and Improve Public Policies

  • Implementing universal Child Development Accounts as a means of beginning lifelong wealth accumulation for all Americans
  • Eliminating or raising asset limits for public assistance programs, especially Medicaid
  • Expanding availability of defined contribution accounts dedicated for retirement so that everyone has the opportunity to receive matched savings for security in old age, regardless of employment
  • Recognizing the unpaid work of caregivers by recording this as work history for Social Security retirement benefits
  • Making long-term care more affordable, because financial security in later life cannot be achieved without advancements in long-term care policies

Advance Knowledge through Research

  • Specify systematically the life course effects on economic security in later life
  • Quantify long-term financial impacts—including such indirect effects as deferred retirement savings—of providing various family supports such as unpaid care for long-term health conditions
  • Increase research on financial exploitation of older adults and on effectiveness of policies and programs designed to protect against exploitation

We are not starting from scratch. Innovative programs and demonstration projects exist in all of these arenas. Good examples: across New York City, Financial Clinic provides educational classes, individual coaching, consulting, research, and advocacy, serving people of all ages. In San Francisco, EARN offers goal-based savings accounts to low-income individuals, including older adults, where retirement can be a primary saving goal. The US government created the Consumer Financial Protection Bureau in 2012 to reduce financial exploitation and to determine best practices in financial management in later life. The Administration for Community Living (including the Administration on Aging) and the National Council on Aging both have economic security initiative aimed at increasing access to public benefits and services, providing education, preventing financial exploitation, and facilitating employment. The list goes on … and in sum, we know a lot about what leads to economic insecurity in later life; and we have many ideas and innovations to improve the financial well-being of the older population. As we move forward, it is important to keep a life course perspective and to focus on programs and services as much as individual education.