Each year, the Social Security Administration updates its Cost of Living Allowance (COLA) for Social Security beneficiaries. Beginning in January 2021, participants received a 1.3 percent increase in their monthly benefit. According to the Bureau of Labor Statistics, the overall inflation rate (the Consumer Price Index or CPI) was 1.4 percent. Earlier this month, the Social Security Administration announced the COLA for 2022. Older adults will see an increase of 5.9 percent in their social security payments beginning in January. The larger adjustment is due to an increase in consumer prices over the past year.
What does it cost to be old?
So, I Googled, “cost of living for older adults”.
The first 14 entries that popped up (the entire first page of results) were all ad placements for assisted living facilities. At the bottom of the list was a set of suggested follow up searches. Did I mean retirement communities? Nursing homes?
The next page of results – there were 15 of them – were also sponsored ads. These sites primarily focused on paying for assisted living. Rather than go further down that rabbit hole, I exited the search and tried a different approach. For the record, if you are looking for information on the costs of long-term care and supportive services, I recommend the annual Cost of Care Survey conducted by Genworth Financial that reports data annually on a variety of long term care services, broken down by state.
Nursing homes provide an important service for frail older adults, but they are not for everyone. According to data published by the National Institutes of Health, the majority of older adults (93.5 percent, or 33.4 million) live in the community. Most of us, even those of us who live with significant chronic health issues, will age in place, in the community.
So, back to my original question… what does it cost to be old?
Most Americans over the age of 65 rely on Social Security and Medicare for income and health coverage in retirement. According to the National Institute on Retirement Security, 40 percent of older Americans rely solely on Social Security income in retirement. The Institute estimates that Social Security payments helped keep 7.5 million households out of poverty in 2020, reducing public assistance costs by more than 10 billion. But Social Security only replaces about 40 percent of pre-retirement income. It helps keep people from falling below the poverty line, but for many, just barely.
So, what does it cost to live in retirement? What is needed to provide a level of financial security?
To help answer that question, researchers with the Gerontology Institute at the University of Massachusetts Boston developed the Elder Economic Security Standard™ Index (Elder Index). The Elder Index is ‘a measure of the income that older adults need to meet their basic needs and age in place with dignity.” The index measures basic living expenses, including housing, health care, transportation, food and other essentials, and helps provide an estimate on what is required to live securely in retirement. The index is available online, and includes data sorted by state, city or metropolitan statistical area (MSA).
In 2020, the average monthly Social Security payment to Ohio residents was approximately $1,503.00, or $18,036 per year. By comparison, the Elder Index calculates that an older adult in good health requires an income of $20,616 to live with some financial security. The requirement is higher if that person rents their home or is still making mortgage payments. If they are in poor health, the Index is more than $31,000 per year. Even with Social Security, many older adults are financially vulnerable. Especially those who rely on it as their only source of income.
Social Security provides income stability, but an unplanned expense for a major home repair or an illness can lead to a financial crisis. Increases in rent, food or prescription drug costs can outstrip household income, chip away at a limited savings, and leave an older adult even more vulnerable.
Benjamin Rose Institute on Aging and its subsidiaries provide a variety of supports that help promote security in retirement. Affordable housing options, service coordination, nutritional support, help with benefits enrollment, financial education and savings programs are some of the ways that we help promote financial stability, security and dignity for the people we serve. It is part of how we continue the legacy of Benjamin Rose, who established the Trust “. . .for the relief and assistance of needy, aged people…to enable them to stay in their homes and maintain their comfort and dignity."