Massachusetts has both higher income and higher costs of living than most other states. A new report from the Center for Retirement Research at Boston College and Boston Indicators at the Boston Foundation, “Wealth Gaps in the Golden Years: Economic Insecurity for Older Adults in a High-Cost State,” evaluates how both facts balance out in terms economic security for older residents and recommends policy changes to ameliorate the financial challenges faced by lower-income seniors.
Income Challenges
The study finds that there is great wealth and income inequality among Massachusetts residents aged 65 and older. While the bottom third has on average only $55,000 in savings and assets, the the middle third averages $660,000 and the top third more than $3.5 million. In terms of income, the bottom third of households bring in $34,000 a year on average, the middle third $66,000 and the top third $169,000. Interestingly, there’s a much higher discrepancy between Massachusetts and the rest of the country in terms of wealth than income. Average income of lower-income seniors nationally is $33,000 a year, just $1,000 less than the Massachusetts average.
The study then compares the income of each group with the Elder Index sufficiency budget prepared by the Gerontology Institute at UMass Boston and finds that fully eight out of ten lower-income elders have insufficient income to meet their needs. This is significantly worse than the nationwide average of 63%, no doubt due to the fact that while costs of living are much higher in Massachusetts, incomes are only a smidge higher.
The study also finds that older households of color are much worse off than both white households in Massachusetts and non-white older households outside of Massachusetts. Three out of four older households of color in Massachusetts have insufficient income to meet their needs as compared to a third of white households in the state and half of non-white households nationally.
These findings are consistent with a recent report of the Joint Center for Retirement Research finding that few older households nationally can afford the combined costs of housing and elder care.
What This Means
The researchers conducted interviews with lower-income Massachusetts seniors to better understand the impact having low income in a high-cost state which revealed the following:
- Many of the respondents did not feel financially burdened until they retired.
- Most rely on Social Security as their primary means of support.
- Few have any retirement savings.
- For many, subsidized housing plays a crucial role in their ability to maintain financial stability and meet their basic needs, but the waiting lists are long.
- SNAP, Medicaid and Supplemental Security Income are also vital.
- It can be difficult for seniors to find and access the public resources and supports available them.
- While most respondents expressed a reluctance to rely on family members who face their own financial pressures and demands on their time, they do rely on them for caregiving and emotional support; just knowing that they are there in an emergency makes a big difference.
Recommendations
Based on their findings, the researchers recommend a two policy initiative to support lower-income seniors in Massachusetts both today’s and those in the future.
Expand and Improve Property Tax Deferrals
The researchers found that property taxes are a significant burden for lower-income seniors who are homeowners. While they may defer their property taxes, administrative burdens mean that many do not take advantage of this program. They recommend eliminating the income limits in the current program and simplifying the enrollment process to make it available to more seniors. Along with this, they recommend shifting the financial burden to the state so that municipalities are not hit with a sudden financial burden.
Automatic IRAs
While it won’t help today’s retirees, the researchers recommend that the state institute a automatic IRA enrollment plan for workers who don’t have employer-sponsored retirement plan. More often than not, these are lower-income workers. Such a plan would mean that more lower-income seniors would have a cushion for their later years.
While both recommendations sound helpful, it’s unlikely that they will make a great impact in the economic inequality in both Massachusetts and the nation and resulting financial burdens on seniors and their families. The researchers recognize that many of the tools necessary to improve the situation for lower-income seniors “are in federal hands, where policies have the broadest reach and scale. But the growing unpredictability of national policy is making state and local action more essential.”