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WHAT ARE THE CURRENT CONDITIONS FOR OLDER ADULTS?
ECONOMICS OF SELF-SUFFICIENCY
The ability of an older adult to age well and live independently depends a great deal upon personal financial resources. This section considers the financial challenges individuals in Austin and Travis County face. The individuals struggling to make ends meet are the ones most likely to develop the most conditions requiring extensive care.
An individual or family is considered self-sufficient when personal resources are sufficient to meet basic needs for housing, food, transportation, medical care, and taxes, without public subsidies such as public housing, food stamps, or Medicaid (Wider Opportunities for Women, 1997). This section examines the cost of living, factors affecting the cost of living, and incomes of older adults in Austin and Travis County.
Table 14.
Monthly Living Expenses for an Older Adult Renter Versus an Older Adult Home Owner
Expense Category
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Single Older Adult Homeowner
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Single Older Adult Renter
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Housing* Housing cost for owners/ Average rent for an efficiency apartment in Austin. (Source: AARP; City of Austin 2000).
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$282
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$459
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Property Taxes Average for taxpayers who receive the over 65 school tax exemption. (Source: Travis County Appraisal District.)
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$89
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N/A
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Utilities, fuels, and public services (Source: U.S. Department of Labor. February, 2000)
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$233
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$233
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Food (Source: USDA Low-cost plan. Sept. 1999)
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$180
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$180
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Medical Care/ Prescription Drugs for those age 75-79 (Source: McClosky. 2000)
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$144
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$144
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Transportation (Source: American Automobile Manufacturers Association and the Consumer Expenditure Survey, 1996 - adjusted for cost of living.)
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$229
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$229
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Miscellaneous Average cost includes clothing, shoes, paper products, non-prescription medicines, household items, telephone, and other. Calculated by taking 10% of all other costs. (Source: Wider Opportunities for Women, 1997)
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$156
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$235
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Medicare Part B - Optional Expenditure (Source: Texas Department of Human Services)
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$46
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$46
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Total Monthly Expenses:
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$1,313
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$1,480
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Source: AARP * Note: 79% of older Americans own their own home, and 21% are renters. Of those who own their homes, approximately 80% own their homes free and clear. Thirty-seven percent of older homeowners spent more than one-fourth of their income on housing expenses.
No exact estimate is available for the income and assets necessary for older adults to be self-sufficient in Austin. However, Table 14 identifies expenses for the average older adult in Austin in a typical month.
Although Table 14 does not show the complete picture of what it costs to live in Austin, it provides a framework for estimating that cost. Based on this information, self-sufficiency in Austin requires an average monthly income of at least $1,300. Because the average monthly Social Security payment is just $806, the cost of living in Austin is only affordable for older adults who have other resources. However, for older adults in the lowest 40% of the income bracket, Social Security makes up approximately 80% of their total income.
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The cost of living in Austin for older adults is estimated at more than $15,000 a year. However, the median income of older persons in 1998 was $13,768.
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This discrepancy between income and cost of living means that it is difficult for older adults to achieve or maintain self-sufficiency, given the high cost of living in Austin/Travis County.
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INCOME OF OLDER AMERICANS
The median income of older persons in 1998 was $18,166 for males and $10,054 for females, with the median income for all older persons being $13,768. Thirty-six percent reported incomes less than $10,000, and only 22% reported incomes of $25,000 or more. However, households containing families headed by persons 65+ reported a median income in 1998 of $31,568, which is higher because it includes income from all members of the household. Income disparities exist between racial/ethnic groups as well - the 1998 median income was $32,398 for Whites, $22,102 for Blacks, and $21,935 for Hispanics (AARP, 1999).
Figure 18.
Sources Of Income Among Persons Age 65 Or Older, By Income Quintile - 1998
Source: Older Americans, 2000
Social Security benefits provide about 40% of the total income of older Americans. Asset income, pensions, and personal earnings compose the remainder. Figure 18 shows that, depending on the income group, many older Americans rely heavily on Social Security. For older Americans in the bottom 20% of the income distribution, Social Security makes up 82% of their total income, and public assistance accounts for another 10% (Older Americans, 2000). Pension wealth is also indicative of the racial differences for older Americans. White households have 26% of their income in pensions, as compared to Hispanics who only have 11%. Impoverished households, regardless of race or ethnicity, are most dependent on Social Security benefits in retirement (Honig, 2000).
As is shown in Figure 19, poverty rates increase with age, but are also higher among women and minorities than men. For example, in 1998, divorced Black women ages 65 to 74 had a poverty rate of 47%, one of the highest rates for any subgroup of older Americans (Older Americans, 2000). According to the Texas Health and Human Services Commission, Travis County residents aged 65 and older are only slightly less likely to live in poverty than individuals ages 18 to 64 (10% vs. 10.7%). This difference is due in large part to the protection provided by Social Security income.
Figure 19.
Poverty Rates for Older Americans by Age - 1998
Source: Older Americans, 2000
A large racial disparity exists between older Blacks and older Whites with regard to assets. Older Blacks have an average net worth of about $13,000, while older White Americans have an average net worth of $181,000. Similar disparities exist based on educational levels. Individuals who have at least some college have more than four times the household net worth of those without a high school diploma (Older Americans, 2000). If current saving patterns continue, Black and Hispanic households will have a significantly lower living standard in retirement relative to Whites (Honig, 2000). This is of particular concern given that Hispanics are the fastest growing segment of the population.
Just as income varies with gender and race, living expenses also vary - depending on age, income level, and living situation. For older adults with greater health needs, expenses are even higher.
On a more positive note, in April 2000, President Clinton signed the Senior Citizens' Freedom to Work Act of 2000. This law allows individuals over the normal retirement age to earn income from work without experiencing a decrease in their Social Security benefit. Currently, the normal retirement age is 65 but it will increase to 67 over the next several years (Social Security Administration, cited 2000).
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FACTORS AFFECTING COST OF LIVING
The American Chamber of Commerce Researchers Association (ACCRA) tracks the cost of living in more than 300 urban areas. According to ACCRA, housing prices and apartment rents pushed the cost of living in Austin to the number one position during the last three months of 1999. Austin is now ranked the most expensive city in
Texas and one of the most expensive cities in the country (Bishop, July 12, 2000). Older Travis County residents on fixed incomes feel the effects of the rising cost of living to a greater extent than does the general population.
A key factor contributing to the high cost of living in Austin is housing costs. Travis County Census data for 1990 shows that 49% of older renters and 18% of older homeowners were paying over 30% of their income in housing expenses. For housing to be affordable, it should cost no more than 30% of the household income. Approximately 22% of older renters and 7% of older homeowners were identified as severely cost-burdened, paying more than 50% of their income on housing expenses.
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The 1990 Census showed that approximately 22% of older renters were severely cost-burdened, paying more than 50% of their income on housing.
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The impact of high housing costs is even greater for lower income older adults whose housing expenses comprise 36% of their cost of living. For those in the top fifth of the income distribution, 26% of income is spent on housing (Older Americans, 2000). These estimates are likely conservative given the rise in the cost of housing in the last ten years.
Figure 20.
Percent of Older Americans' Incomes Spent on Health Care by Income Quintile - 1998
Source: Older Americans, 2000
Health costs are the next highest expenditure for older adults. Figure 20 shows the differences in health care expenditures by income level. Unlike housing costs, middle class older adults spend the highest percentage of their income on health care. Middle class elders are often in the position of not qualifying for assistance and not being able to afford out-of-pocket costs for services. As the population of older adults increases, this problem will affect more people.
Health care expenditures also increase with age. As Figure 21 shows, people ages 65-69 spend an average of $5,864 a year, while those ages 85 or older spend more than $16,000 a year. This increase in health care costs is due, in part, to the fact that older persons have more chronic medical conditions. One of the most expensive chronic conditions is Alzheimer's. Care for an individuals with Alzheimer's costs between $38,906 and $43,600 a year. Almost 75% of that cost is borne by informal and family caregivers (Administration on Aging, 1999). Health care costs also rise with level of disability. Among the 9.9 million persons 75 to 84 years old in the U.S., 63.7% have disabilities (Chartbook on Disability, 1996).
The need for long term care is also expensive. For those individuals who must receive care in an institution, the cost is six times what it costs to receive care at home. In 1996 the cost of institutional care was $38,906 versus $6,360 for in home care (Administration on Aging, 1999).
Figure 21.
United States Health Care Expenditures by Age Group - 1996
Source: Older Americans, 2000
The income and expenditure information shown in this report demonstrates that many older women, minorities, and lower-income adults are struggling to make ends meet in Austin and Travis County. Although Social Security is often regarded as the income safety net for older Americans, in many cases, this net is not large enough to provide for at least 40% of the older adults in our community. As the cost of living and the cost of health care continue to rise, the threat to self-sufficiency will continue to increase.
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