How Many Struggle to Get By in Retirement?

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Most researchers agree that the official poverty measure in the United States does not paint an accurate picture of modern day economic resources and spending needs. Official poverty resources fail to account for in-kind transfers, capital gains and losses, income and payroll taxes, and out-of-pocket health spending. Nor do they account for the value of owner-occupied housing and the potential income from financial assets. Also, official poverty thresholds fail to capture the growth in housing, health, and other costs.nThis paper uses data from the 2004 Health and Retirement Study to demonstrate how the poverty rate of adults age 65 and older changes using different resources and thresholds. Results show that alternative poverty measures that account for out-of-pocket health spending produce higher poverty rates than the official measure, even those that include the value of housing and financial assets. Poverty is concentrated among singles, blacks and Hispanics, and adults age 85 and older regardless of how it is measured. The same populations designated as poor using the official measure have relatively low home equity values and little potential to annuitize assets to improve their standard of living in retirement. nHigher alternative poverty rates among all older adults and especially high rates among some subgroups show the importance of protecting vulnerable groups when considering reforms to improve solvency in the Social Security and Medicare programs. It will be critical to target any benefit cuts and cost shares on older adults who have the ability to pay these new costs in retirement.