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THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

III

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Al l ri gh ts r es er ve d. M ay n ot b e re pr od uc ed i n an y fo rm w it ho ut p er mi ss io n fr om t he p ub li sh er , ex ce pt f ai r us es p er mi tt ed u nd er U .S . or a pp li ca bl e co py ri gh t la w.

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CHAPTER

113

Living Environments of Older People

The learning objectives of this chapter include understanding

That where an older person lives has a great impact on the quality of her of his life. ■ The range of living environments including metropolitan, rural, small town, suburban, ■ and urban settings. How various environments impact the lives of older people. ■ That factors such as aging in place, availability of services, transportation, living alone, ■ living with a spouse, racial and ethnic characteristics, and household size impact the liv- ing characteristics of older people. The new trends in moving and staying in place, as well as the capacities of communities ■ to accommodate aging residents.

JANE AND PETE: ENDING UP ISOLATED?

Jane and Pete moved to the suburbs of their medium-sized eastern city in 1954, when Pete got a promotion to sales manager and their three children were 2, 4, and 7 years old. The American dream of owning their own home in a new area with space for the kids and new schools was a goal they realized along with millions of other Americans in the 1950s and 1960s. Life, it turned out, was not paradise in the suburbs, but compared to many other set- tings, it was pretty good. But as they got older and the children moved away, Jane and Pete thought it might be good to try a new way of life after Pete retired. They had enough money from the sale of their house to buy a mobile home in Florida and a small cottage on a lake in the northern, rural part of their state.

This was great living as some of their friends moved to the same area of Florida for the winter months. In the spring, they moved up north to their cottage. This went well until they were in their early 80s. All of their friends had died or were too ill to go back to Florida. Pete could no longer drive very well to get to the bank or store. They gave up trying to go to church. It was too hard to

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114 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

get to and besides, they didn’t know many people anymore. Up north at their cottage, things got pretty tough, too.

Pete had a heart attack one summer and he was 35 miles from the nearest hospital. The adult children were busy with their own lives and lived in different cities; the closest lived 40 miles away. After his hospitalization, Pete needed a range of services, some of which were not available in their rural area. When their neighbor was gone, there was no one to get their groceries. Jane felt isolated and helpless. Like so many of her generation, she had let Pete do all the driving. Their kids, helpful and caring, also felt helpless so far away.

ELLEN: WHERE WILL SHE GO?

Ellen had never married. She had a fi ne education and devoted herself to her profession of social work. She began working in the 1930s and for a time was paid in scrip (IOUs from her employer) because of a budget crunch. Her salary was never large; she worked at a time of relatively low wages in an area of the country that was not too prosperous. Ellen lived frugally and helped her brother send his three children through college.

In 1968, Ellen retired at the age of 65. She had lived in apartments ever since graduation from college and had moved only twice in all those years. Now her apartment building was being torn down as part of a new shopping center development. Where can Ellen move? What kind of living facility can she afford? The savings she accumulated are now quite modest, given the ongo- ing infl ation since her retirement. The income she earns on this money has decreased dramatically with falling interest rates. In addition, Ellen’s income from her pension and Social Security is very small because both are based on her prior wages, which were always rather meager, particu- larly by today’s standards. Does Ellen have to move to substandard housing in a deteriorating neighborhood?

WHERE DO OLDER PEOPLE LIVE?

This chapter is the fi rst in Part III, which focuses on where and how older people live. Included are chapters on where they live physically, their economic status, their work status, and, if applicable, their retirements. As with most aspects of older adult life, great diversity is common in all of these areas.

First, this chapter looks at where and under what circumstances older people live. What is the importance of living environments to older people? What are the factors that directly infl uence the satisfaction or happiness of older people in their living environ- ments? What conditions make them unhappy or unable to function adequately, in par- ticular living arrangements? Where can older people live? What are their options?

What does it mean for older people to live in urban or rural America? What are some of the implications of living in the suburbs as persons continues to grow older? These types of questions have important implications for older persons as well as for people who work with them in social agencies, health services, religious organizations, and businesses. They also have real implications for planners and policy makers on all levels in the public and private sectors.

This chapter concludes by examining some of the major factors of living arrange- ments that directly affect how older people are able to function. These factors affect the satisfaction and happiness of older people as well as their ability to carry on independent lives. What are the things about living environments that affect the ability of older people to survive with dignity and independence? What can be done to improve these condi- tions? What can people who work with older persons do to assist them in coping with some of these important factors?

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8. LIVING ENVIRONMENTS OF OLDER PEOPLE 115

IMPORTANCE OF LIVING ENVIRONMENTS TO OLDER PEOPLE

Where a person lives has a great impact on the quality of his or her life. The type and con- dition of a person’s living unit and the general characteristics of the neighborhood make up a person’s living environment. Until relatively recent times, a person’s environment was not a very important consideration in the study of the social sciences (Howell, 1980; Lawton, 1983, 1985). Later research has shown the vital importance an older person’s liv- ing condition has on his or her overall well-being, including physical and psychological health (Riekse and Holstege, 1996). It also relates to an older person’s ability to inter- act and relate to other people. Indeed, going back to the 1971 White House Conference on Aging, it was determined that except for an older person’s spouse, his or her living arrangement was probably the single most important aspect of daily life.

Aging in Place

It is generally agreed that living environments are vitally important to life satisfaction. This is particularly true for older people because they spend so much of their time in and around their homes. Most no longer go off to work anymore, at least on a regular basis. Many are limited in their ability to get in their cars and go somewhere else. As people continue to age, many are even limited in their ability to go to the grocery store, regional malls, their places of worship, or their doctors. As people continue to age in place—to become older in the places they have been living—they fi nd themselves more and more confi ned to their immediate environments. Multiple factors should be considered in regard to an older person choosing to age in place. These factors are explored within the Practical Application at the end of Part III of this textbook.

Availability of Services

The living environments of older persons include not only the housing units in which they live, but also other aspects of living, such as the availability of shopping facilities, medical services, transportation, and access to relatives and friends. Good transporta- tion and access to relatives and friends can be more important than the quality of the living unit itself. For an older person who does not drive, a home, apartment, or other type of living unit may become a virtual prison if transportation is not readily available. Accessibility to relatives and friends depends on the availability of transportation. In America’s mobile society, with its fragmented family units, many older persons fi nd themselves hundreds or even thousands of miles from their children, grandchildren, and friends. All of these factors have a great infl uence on the quality of life for older persons in our society.

As where older people live is so important to their happiness, their sense of well- being, their ability to feel secure, their ability to feel that they are still somehow in charge of their own lives, and their ability to relate to others, especially signifi cant others in their lives, it is important to look at some of the major factors that contribute to their overall happiness in their living environments.

Metropolitan Areas

In reviewing the living environments and situations of older people in the 21st cen- tury, it is important to note that 81% of people over age of 65 live in metropolitan areas (Administration on Aging, U.S. Department of Health and Human Services). This is a

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116 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

percentage and numerical increase from the 1990 census. And the oldest-old population (aged 85 and older) is three times as likely to be living inside metropolitan areas as out- side these areas.

Of those in metropolitan areas, 60% live in the suburbs. This continues a trend that began in 1980 when, for the fi rst time, older persons in the suburbs outnumbered those in the central cities (U.S. Senate, 1991). The suburbanization of America became a major phenomenon in the 1950s. At that time, younger families moved to the suburbs for a variety of reasons: to live and raise their children in “ideal” conditions, thus “escaping” crime, pollution, congested traffi c, and deteriorating housing.

Older Suburban Areas

In older suburban areas, the problems of aging in place continue to emerge. These problems will become the focus of growing older in America as they apply to hous- ing. The American suburb was built around the automobile—its widespread own- ership and use. The automobile revolutionized how Americans lived, worked, and played. Workplaces, shopping centers, recreational facilities, and many houses of wor- ship were all built around the use of the automobile. As people grow older, physical changes occur that affect their ability to perform certain tasks, including driving an automobile. These changes are very gradual for most people and hardly noticed at fi rst. However, they are real and in time will affect people who are dependent on their use of automobiles.

What makes this situation worse is that public mass transportation is minimal in most American suburbs. Much of what is available is geared toward moving suburban- ites to central city business and fi nancial districts. Advocates for the elderly are calling for ways to help them go to stores, doctors’ offi ces, houses of worship, and other services when driving becomes diffi cult, particularly in the hours of darkness and on congested freeways and crowded streets.

Small-Town Living

Relatively few older persons live in small communities (less than 2,500 residents), refl ecting the long-term trend toward urbanization (including suburbanization) in America. Early research has found that older persons in small towns have fewer ser- vices, lower income, and poorer health than older persons who live in metropolitan areas (Lawton, 1980). However, older persons in small towns tend to interact more with friends and neighbors—with younger people and with persons their age—than do their counterparts in metropolitan areas. For many older persons, small towns are much easier places to live in. Generally, things move slower, including traffi c. Points of inter- est as well as other services (stores, houses of worship, banks, post offi ces) are closer. Change is usually less pronounced, and relatives, friends, and neighbors are not likely to move away. Knowing more people around town gives older people a sense of secu- rity. If they become ill, a neighbor, friend, or even a store owner or manager will deliver food. Knowing where everything is in a small town and being able to move around are great comforts. However, services to deal with crises or prolonged-illness situations usually are limited. With the closing or threatened closing of many rural hospitals, this is particularly true of emergency medical care, a real crisis for many people in rural and small-town America.

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8. LIVING ENVIRONMENTS OF OLDER PEOPLE 117

TRANSPORTATION AND OLDER PEOPLE

Transportation is a major problem facing older people in all types of settings—rural, urban, and suburban. This is particularly true of the older suburbs where so many older people live. Most activities older people participate in, and most services they need to access, require some form of transportation, typically a private car, or public transporta- tion, which is limited in many areas of the nation (Walljasper, 2009). The impairments that so many older persons experience as they continue to age can hinder their use of either public or private transportation without special assistance. And without adequate and appropriate transportation, many older persons are at risk of losing their independence (Cox, 2005). They become trapped in their houses when they are not able to access pro- grams and services as well as attend and engage in activities that are vital to their lives— religious services, shopping, movies, doctors’ appointments, and so on.

Attempts to meet the transportation needs of elders as well as the younger dis- abled go back to the amendments to the Urban Mass Transit Act of 1964. Funds were to be allocated to modify transportation for those who are frail and disabled as well as to develop new transportation services. Later, legislation provided reduced fares on public transportation for the elderly and handicapped along with federal funds for transporta- tion in nonurban areas—small towns and rural areas (Cox, 2005). Currently, there exists a wide array of transportation programs at the local, state, and federal levels includ- ing the purchasing of vehicles and the installation of assistive devices and wheelchair lifts. The Federal Transit Administration in the Department of Transportation and the Administration on Aging in the Department of Health and Human Services are develop- ing a plan to coordinate the available programs to facilitate transportation for older per- sons and the disabled. As it is with all assistance programs, adequate funding is essential. More information about funding for transportation services and the unmet needs for transportation is presented in Chapter 13.

IMPACTS OF LIVING ENVIRONMENTS/LIVING ARRANGEMENTS

The living arrangements and living environments of the older population are important indicators because they are linked to income, health status, and the availability of care- givers. For example, older people who live alone are more likely than older people who live with their spouses to be in poverty (Older Americans 2010).

As Baby Boomers Retire

As they have had at each stage of their lives, Baby Boomers will continue to have a sig- nifi cant impact on the kinds of living environments and housing arrangements they will choose as they move into the later stages of their lives (Mellor & Rehr, 2005). It is predicted that Baby Boomers will reinvent retirement in almost all aspects of their lives including living environments, living arrangements, moving patterns, issues of working, and liter- ally all social and economic issues that relate to growing older.

LIVING ALONE

In 2009, 11.4 million people aged 65 and older lived alone. Almost three quarters of these were women (Administration on Aging, U.S. Department of Health and Human Services). Between 1990 and 2009, the proportion of older women living alone actually declined. In the same period, the proportion of older men living alone increased (Taeuber, 1993).

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118 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

The living arrangements and living environments of the older population refl ect factors other than their health status, socioeconomic situations, family caregiving, and cultural ties. Research has found that independent living arrangements—living alone or with a spouse—are considered most desirable for older adults in the United States because they offer more autonomy. However, these living arrangements (in particular living alone) can increase social isolation and reliance upon formal social supports.

Baby Boomers Living Alone

Overall, the proportion of older persons who live alone increases with age. This trend has been of some concern to aging specialists looking at the aging of the Baby Boom generation because as they grow older, larger numbers of elderly people are projected to live alone (Mellor & Rehr, 2005). But some experts have pointed out that this may not be as big a problem as some have anticipated as Baby Boomers are more practiced at living alone than their parents or grandparents. This is because of an increase in the numbers of those who never married, higher divorce rates, and later marriages translate into many Baby Boomers having had more experiences in living alone than earlier generations. As such, it is speculated that it will be less diffi cult for many Baby Boomers to cope with liv- ing alone.

Living With a Spouse

Men aged 65 and older are more likely than women the same age to live with their spouses (Older Americans 2010). As they move into the later years—aged 85 and older—more than half of older men still live with their spouses while less than one eighth of older women live with their spouses. Far more women in this oldest age category live alone than live with their spouses or live with others (children, friends, etc.).

Living Arrangements by Race

The living arrangements of the older population also vary by race. Only 13.4% of non- Hispanic White women live with relatives, while more than 30% of older Black American, Asian, and Hispanic women do so (Older Americans 2010). And this pattern is similar for men—only 5.8% of non-Hispanic White men live with relatives while more than 10% of older Black American, Asian, and Hispanic men do. The proportion of older men living with their spouse is lowest among Black Americans (54.9%) and highest among Asians (76.9%; Older Americans 2010). Many studies have shown that cultural differences play an important role in determining the living arrangements of older people.

A New Trend in Not Living Alone?

As indicated earlier, living alone increases with advancing age, particularly among older women. And living alone, particularly for women, can be a signifi cant factor in going into poverty or near poverty. According to U.S. Census Bureau data and an AARP Foundation Women’s Leadership Circle study, 500,000 women aged 50 and older live with a nonro- mantic housemate, and more than a third of the women aged 45 and older who were sur- veyed said that they would be interested in sharing a house with friends or other women as long as they could have their own private space (Mahoney, 2007).

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8. LIVING ENVIRONMENTS OF OLDER PEOPLE 119

The main reason women may be interested in sharing a home with another woman is a fi nancial one. An obvious concurrent benefi t is having companionship available, which has real value for many older women. And according to Mahoney (2007), many of the 25 million single women aged 45 and older are proud of their status, at least for the present time. But at the same time, many of these single women realize that they are not as prepared for their retirement years as are married women their same ages. In addi- tion, a good percentage of single women have not been able to earn as much money from working as most men earn from working.

Many single women who are divorced or widowed understand fi rsthand how diffi - cult it can be to maintain a one-income household. Mahoney (2007) pointed out that these fi nancially strained women may be willing to consider any housing option as long as they can keep their freedom. “After all, we’re from the generation who lived in commu- nities back in the 1960s,” stated Connie Skillingstad who founded Golden Girls Housing in Minneapolis (Mahoney, 2007, p. 49). This nonprofi t service helps women look at non- traditional options for housing that meet their fi nancial, social, and emotional needs. Skillingstad pointed out that it is diffi cult for some women to seriously consider shared housing. She went onto say that in our culture it has been diffi cult to incorporate the concept of living communally as a normal way of life. For women to seriously consider nonromantic shared living, there is usually a compelling fi nancial need brought about by a divorce, a job loss, an illness, or simply realizing they do not have enough money to purchase and maintain their own single residences.

Indeed, Skillingstad predicted that this type of housing arrangement may be the wave of the future due to the following factors: (a) fi nancial security for many single women who can pool their resources to provide and maintain housing arrangements that meet the necessities of their lives; (b) time to contemplate one’s next or fi nal move after the death of a spouse, a divorce, or any major life changing event; and (c) peace of mind knowing that one is not alone in a residence is a motivator for many women, especially as they age in place (Mahoney, 2007). Companionship can enhance the mental and physical aspects of life.

Factors in Choosing Shared Living

Mahoney (2007) pointed out that in spite of the obvious benefi ts of this possible new trend, there can be signifi cant downsides. Sometimes the other person can appear to be friendly and compatible and turn out to be the opposite. “Even women who have known each other for years can discover that living together is very different from meet- ing each other for lunch and a chat,” said Jane Portman, an attorney and coauthor of Every Landlord’s Legal Guide (8th edition; cited in Mahoney, 2007, p. 81). She went on to state that it is important to discuss each other’s expectations before making any shared housing decision.

STAYING IN COMMUNITY

Most of today’s older people and Baby Boomers want to continue to live in their commu- nities during their older years (Mellor & Rehr, 2005). Indeed, an AARP (2006) study enti- tled, Aging, Migration, and Local Communities: The Views of 60+ Residents, and Community Leaders, points out that nine out of 10 persons aged 60 and older (41.5 million) do not want to move from their general location. They may move from a larger residence to a smaller one if they downsize (move from the large house in which they raised their children to a Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

120 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

smaller house, apartment, or condominium). It is a myth that most or even many persons pack up and move to Florida or Arizona or some other sunny place once they retire. The AARP study cited previously clearly indicated that older people make essential contribu- tions to their own communities including volunteering, voting, mentoring, and generally being an asset to the area in which they live (Ryers, 2006).

Naturally Occurring Retirement Communities (NORCs)

As so many older people (as well as Baby Boomers) choose to remain in their own homes and communities, this results in something known as Naturally Occurring Retirement Communities (NORCs; Mellor & Rehr, 2005). These are communities wherein there are groups or clusters of persons who aged in place—stayed in the same residence where they lived while working and raising their families. Recently, there has been increasing interest in providing the services these older people need to remain independent in their own homes.

Baby Boomers and NORCs

As the nation’s Baby Boomers move into their older ages in the early decades of the 21st century, much focus has been put on their impacts on the nation’s major entitlement programs—Social Security and Medicare. But another older-age factor is also a major concern—where and under what circumstances will they live out their 60s, 70s, 80s, and beyond? Will most of them want to move to a warmer climate if they do not already live in one? Will most of them want to move to some fancy retirement village or home? Will many want to move in with their relatives—adult children, grandchildren, or some other kinfolk? As noted previously, the answer to all these questions is a resounding “no.” Most want to remain in their communities so the real question is how are they going to be able to do this?

In a report by the AARP entitled, These Four Walls . . . Americans 45+ Talk About Home and Community (Greenwald & Associates, 2003), more than four out of fi ve of those sur- veyed wished to remain in their existing residence with 82% of them wishing to obtain the services they may require to remain there—even after they are not able to care for themselves. The key is the availability of services they may require to stay in their own homes. And this is where NORCs come into play. NORCs are a way to organize commu- nities in which clusters of people can naturally grow old together. They:

Provide ways for older people to retain or develop positive roles as opposed to ■ viewing elders as only a bunch of people with needs; Empower older people as civically engaged; ■ Promote social connections—keep current ones and develop new ones; and ■ Develop an assortment of supports for older people that are fl exible and ■ available.

MOBILITY AND MIGRATION OF OLDER PEOPLE

As noted earlier, most older people do not move. Among all the older people in the United States in 2011, 94% lived in the same place they lived the year earlier (“2011 American Community Survey”). By comparison only 6% of people aged 65 and older moved while 16.6% of people aged 1 to 64 moved. And among the small percentage of older people who moved, almost 60% moved within the same county.Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

8. LIVING ENVIRONMENTS OF OLDER PEOPLE 121

Reasons for Moving

Research has shown that these relatively few older people who make an “amenity move” (move for better climate; fi scal characteristics that might include favorable property, sales, or income taxes; or specialized health care access) tend to move soon after retirement, when economic, social, and health resources are adequate to support such moves.

One in fi ve older persons moves for family reasons other than a change in marital status. Research has shown that the older population’s domestic migration is typically due to older parents’ wish to live closer to their children or to move back to their former communities if, when younger, they were among the few who left their communities (65+ in the United States, 2005).

Newer Trends in Moving

Some research has pointed out that there are a couple of new trends for moving in older age—although not widespread. One is the development of various types of retirement housing options on or near college and university campuses. This is particularly attrac- tive to those college graduates who want to return in retirement to their respective col- lege/university campuses to become connected once again to college activities including taking or auditing classes, attending lectures, and enjoying sporting events. For those universities that have medical schools, such living arrangements can also provide older people with direct access to excellent medical care, often benefi ting from cutting-edge medical research. Some 50 colleges and universities have university-linked retirement communities (URLCs) on or near their campuses (Abrahms, 2008). An added bonus is the opportunity for intergenerational living, which can be very stimulating for both young and old.

Another mini trend is the moves of affl uent Baby Boomers, or even older people, to town centers. Some affl uent older persons are moving to the downtowns of numerous cit- ies across the nation into refurbished older buildings (including old factories) and newly built upscale condominiums. These areas typically include specialty shops and cafes— kind of like town squares of earlier times. By the early 21st century, there were more than 150 of these “lifestyle centers” from Virginia to Oregon (Diament, 2007).

Why Some Older Persons Resist Moving

The question can be asked, “Why are some older persons opposed to moving when a move could greatly improve their living accommodations?” One reason is money, or the lack of it, as was discussed before. To move from deteriorating housing into a better hous- ing unit costs money, both in the form of higher housing costs and moving expenses. Insuffi cient funds, real or perceived, is often the cause of an older person not wanting to move. Second, some people, young or old, simply resist change, especially a change that affects so much of their lives. Fear of the unknown is a limiting factor for people of all ages, but particularly for the old who no longer have the physical or emotional resources to cope with unknown changing life conditions. Third, relocation is a traumatic event, especially when a person’s life centers on his or her place of residence. Relocation means leaving behind the old neighborhood, familiar surroundings, old friends and acquain- tances, and neighborhood ties built over the years. Familiar surroundings in old neigh- borhoods give older persons a sense of stability and security. These losses are mourned, both physically and psychologically, by many elderly people.

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122 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

facilities such as stores, physicians, and dentists. As services of all types continue to move toward the suburbs, many older people are left without them unless they have access to reliable, cheap transportation.

In evaluating their existing housing situations, most older people refer to distances from medical and shopping facilities as a key factor, followed by distance from relatives, the climate, and assistance with housekeeping and meal preparation. When these fac- tors become more remote and inaccessible, older persons are bound to feel the negative results of isolation in their lives.

Types of Moves

Moves may be required because of the inadequacy of an older person’s present living arrangement, the closing of a retirement home or some type of supportive facility, or the physical or emotional deterioration of the elderly person. In addition, some older people move after they retire to enjoy recreational areas or benefi cial climates. Some move to be near their adult children who can interact with them socially and look after them if and when they need assistance.

FINANCIAL STATUS AND HOUSING

One of the major factors that affects where and how older people live is their fi nances, including income and resources. The fi nancial status of older people is discussed in Chapter 10. This section briefl y examines what an older person’s fi nancial status means to his or her living arrangements.

As with other segments of the population, an older person’s fi nancial status has a direct relationship to his or her ability to live in a housing unit that adequately meets the needs of daily living. For some, this may mean upgrading and remodeling existing single-family homes to adapt them to the changing needs of older people, including such things as bathroom and washing facilities on the ground fl oor, new insulation for warmth in the winter or cooling in the summer, and adequate lighting to accommodate vision limitations. For others, it may mean the ability to move to a new neighborhood when essential services leave the old neighborhood or when the neighborhood becomes less safe. For still others, fi nancial resources may mean the ability to leave their old home loca- tion to move to a retirement area in another section of their state or the nation. Included in these are the “snowbirds” who migrate to warmer climates upon retirement. For others, as they continue to age, it may mean moving to some form of congregate living arrange- ment when they need additional support services on a daily basis.

Losing Homes

For many older people, fi nances are a matter of survival in housing. Keeping a roof over their heads becomes a major struggle. Some do not win that struggle; they join the ranks of the homeless. This has become a major issue since the collapse of the housing market, which began in 2006 and became a crisis in the Great Recession of 2008 to 2009 (Fleck, 2008). This will be discussed further in Chapter 9. “I’m shocked by the numbers of elders who succumbed to predatory refi nancing—interest only loans and adjustable-rate mort- gages. More than half of my clients are facing displacement,” said Len Raymond, founder of the nonprofi t Homeowner Option for Massachusetts Elders in Boston, which counsels people aged 50 and older who are facing foreclosure—losing their homes (cited in Fleck, 2008, p. 13).

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8. LIVING ENVIRONMENTS OF OLDER PEOPLE 123

SOLVING LIVING ARRANGEMENT PROBLEMS THROUGH MEDIATION

A movement has developed across much of America that is already offering, and has greater potential to offer, services for older people to help them cope with their surround- ings (neighborhoods/environments). It was identifi ed by various labels including commu- nity mediation, alternative dispute resolution, reconciliation center, neighborhood justice center, or just mediation. The goal has been to resolve disputes without going through the formal legal system by coming to a resolution of problems so that all parties to the dispute can live together in peace. Having one party “win” and the other “lose” has not been the objective. Reaching a negotiated agreement that refl ects the best interests of both parties has always been the overriding objective (Hoffman & Wood, 1991–1992). A “win–win” result to disputes is the goal. Community mediation is being used by older people in a wide array of living environments, from neighborhoods with single- and multiple-family homes to nursing facilities.

Mediation in Neighborhoods

In neighborhoods, alternative dispute resolution centers are handling a range of cases that involve older people. Disputes between neighbors over property use, driveways, trash, barking dogs, loud music, noisy parties, lot lines, unruly children, and a number of other issues are being mediated by some 450 mediation centers in communities across the nation. In addition, the AARP’s Standing Committee on Dispute Resolution has looked for ways to include mediation in disputes that involve some types of criminal activity. This

has been particularly useful with neighbor- hood youth who engage in activities that affect the homes and lives of older people. Community mediation has been par- ticularly effective in land- lord/tenant disputes. This can involve the older per- son either as a landlord or as a tenant.

To learn more about older adults using mediation to solve disputes and disagree- ments without involving attorneys, watch Video 7.

ARE COMMUNITIES READY FOR OLDER PEOPLE?

According to a major study in 2006 entitled, The Maturing of America—Getting Communities on Track for an Aging Population, by the National Association of Area Agencies on Aging, less than half of the nation’s communities have begun preparing to cope with the var- ious needs older people face trying to remain independent in neighborhoods. This is critical because in addition to the large numbers of older persons who already live in communities, the 77 million Baby Boomers began to turn 65 in 2011. Consequently, by 2030, the numbers of older persons (aged 65 and older) will double from the 2000 census. According to the chief executive of the National Association of Area Agencies on Aging,

Episode 7: Support Systems

High Bandwidth:

http://raidercast.grcc.edu/flash/2011_2012/grcctv/successful_

aging/success_aging_7_large/grcc_player.html

Low Bandwidth:

http://raidercast.grcc.edu/flash/2011_2012/grcctv/successful_

aging/success_aging_7_small/grcc_player.html

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124 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

Sandy Markwood, “The fi ndings call for communities to begin planning now” (Powell, 2006, p. 1). The study indicated that

One third of the communities have inadequate access to health care services. ■ Only 25% of the communities provide nutrition education. ■ Over one third of the communities have fi tness programs for older persons. ■ Only half of the communities have home modifi cation programs to help physi- ■ cally challenged older persons stay in their own homes. Over 40% of the communities do not offer job training or retraining services. ■ Many communities do not have a central information point to disseminate infor- ■ mation regarding services.

Some specifi c recommendations of this study focused on simple things such as making larger, more light refl ective street signs and increasing the time of pedestrian crossings (Powell, 2006).

SUGGESTED RESOURCES

Age Friendly Communities: http://afc.uwaterloo.ca This website, sponsored by the University of Waterloo, provides tools and resources to help

guide communities towards developing solutions to become more age friendly, while recog- nizing the uniqueness of each community.

National Aging in Place Council (NAIPC): http://www.ageinplace.org The NAIPC is a senior support network dedicated to providing information and resources to

assist older adults to remain independent in their own homes as long as possible. The website includes practical advice (e.g., on making homes senior friendly, transportation resources), fi nancial options (e.g., home equity loans), and a search feature to fi nd service providers ranging from elder law to travel.

Naturally Occurring Retirement Communities: http://www.norcs.org This initiative provides assistance to communities dedicated to supporting older commu-

nities and aging in place, focusing on support services for naturally occurring retirement communities.

“When Seniors Relocate”: http://ohioline.osu.edu/ss-fact/0143.html This website includes a downloadable tip sheet to help older adults in relocating. Topics

focus on how to be supportive of a move and adjusting to relocation.

Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

http://afc.uwaterloo.ca

http://www.ageinplace.org

http://www.norcs.org

http://ohioline.osu.edu/ss-fact/0143.html

1CHAPTER

125

Housing Options for Older People

The learning objectives of this chapter include understanding

The array of specifi c housing options available (depending on fi nancial status) to older ■ people. That homeownership as a type of housing option is the most common among older ■ persons, and that the viability of this form of housing unit can have positive as well as negative consequences. How housing options—other than the single-family home—may offer advantages to an ■ older person depending on each person’s needs and wishes at a given point in her or his aging process. Why it may not be workable or desirable for older person to move into the homes of ■ adult children. Housing trends for older people. ■

JOHN AND MAY: STAYING PUT

John and May were married in 1935. John was a painting contractor. Until the birth of their fi rst child, May was in charge of an offi ce for a large band instrument company. The goal of both John and May was to build a home across from a new park in a new section of the city. With lots of hard work, sacrifi ce, and worry, they were able to hang onto their house through the end of the Great Depression and World War II. They raised their three children there. Within six blocks from their house were churches, grocery stores, and other services including a dentist and a physician. The park across the street had baseball diamonds, a swimming pool, and acres of grass for everyone to enjoy in the sum- mer. In the winter, there was an ice-skating rink that attracted a lot of young people.

Fifty years later, a lot of things have changed. John died. The children are all grown. May continues to live alone in the house she loves so much, a house fi lled with her possessions and memo- ries. Her church moved to the suburbs in 1986. Most of the stores in the area have changed: The old

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126 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

movie theater only shows triple-x movies. The clothing store is now a massage parlor. Two liquor stores now occupy the old drug store and the old ice cream parlor. The dentist and the physician have moved to newer professional buildings. The park, once the center of outdoor recreation for the whole family, has attracted a large number of drug dealers and users. Police are regularly called to break up fi ghts. May is reluctant to move, even though her children strongly encourage her to do so.

HOUSING OPTIONS FOR OLDER PEOPLE

This chapter outlines the types of housing available to older people. Although they are called options, in some important aspects they are not really options at all because (a) the vast majority of older persons, as well as almost half (48%) of the older Baby Boomers, want or plan to continue to stay in the housing unit they are living in and never move (Kravitz, 2011); (b) many older people are not willing to consider other types of living arrangements, even if another type of unit may be more suitable to their needs; and (c) many older people simply cannot afford to move to a different or more appropriate liv- ing arrangement. The overwhelming trend in America is to age in place, to continue to grow older in one’s current residence regardless of the condition of the dwelling unit, the chang- ing nature of the neighborhood, and the special needs an older person may have with the tasks of daily living. As a result, large numbers of older people in America are trying to cope with daily living while remaining in their single-family homes where they raised their families. A major aspect of aging in place that has gained a lot of attention is adapting existing homes to the particular needs of people that develop physical limitations.

HOME OWNERSHIP

The community-dwelling older population in the United States is primarily home own- ing. Of all the older households, almost 75% are single-family homes including manu- factured/mobile homes (65+ in the United States, 2005). And the rate of home ownership varies by region of the nation. Home ownership rates also vary by family status and liv- ing arrangements. The majority of older married couples own their own homes (65+ in the United States, 2005).

Housing Costs

The amount of money spent on something called the housing cost burden, or the expenditures of housing and utilities combined, that exceeds 30% of all household income has increased somewhat for older people over the past decade. Since the 1980s, the housing cost burden has increased from 30% to 37%. In comparison, “The housing cost burden for all United States households has increased from 26 percent to 35 percent in the same period” (Older Americans 2010, p. 21). The difference in overall housing costs between the older population and the cost of the population refl ects the reality that older people typically choose to remain in the homes in which they have lived for relatively long periods of time.

Housing Conditions

Older people tend to live in older homes. The median year in which the houses of older people were constructed was 1962 meaning that by now half of their houses are over 50 years old. An interesting sidelight is that older renters live in newer housing more often than do the rest of the population (65+ in the United States, 2005).

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9. HOUSING OPTIONS FOR OLDER PEOPLE 127

Overall, older people tend to live in adequate housing conditions, which means they have complete kitchens, washing machines, clothes dryers, air conditioning, warm air furnaces, and complete plumbing facilities.

About 40% of households with persons aged 65 and older experience one or more of the following types of housing problems: too costly, physically inadequate housing, and/or crowding. The rates of these problems are a little more than the rates of problems among all United States households (Older Americans 2010).

Physically inadequate housing, or housing with severe or moderate physical prob- lems such as lacking complete plumbing or having multiple upkeep problems, has become less common. Only about 4% of households with persons aged 65 and older have inadequate housing compared to 8% in the 1980s. In contrast, 5% of all United States households report living in physically inadequate housing in the fi rst decade of the 21st century compared to 8% in the 1980s (Older Americans 2010). Lack of fi nancial resources is generally cited as the reason for the housing of older and younger people that had severe physical problems.

Another important component of the housing conditions of older people is the need to modify existing housing units to meet the changing physical needs of many people as they go through the aging process. As noted previously, most older people want to remain in their own communities in their own homes. Even if their health status changes, most still want to age in place in their own home. But in many cases, this requires home modifi cations—changing or adding some physical characteristics of the home—be it wider doors, access ramps, grab bars, and so forth. This is addressed in more detail later in this chapter.

Housing Energy Costs

Although it has been a persistent problem for many older householders for the past few decades, a housing problem that has gained national attention puts many older people at real fi nancial and physical risk—the cost of energy. Since the fi rst part of the 21st cen- tury, the price of energy has soared making it diffi cult for more and more older people to adequately heat, or in some cases, cool their homes. For example, the price of oil fl uctu- ated from roughly $25 a barrel to over $100 a barrel from 2001 to 2011. This has translated into increasing energy costs—all of which greatly impact older persons as so many live on fi xed and/or inadequate incomes.

Factors Infl uencing Energy Costs

The reasons for dramatic increases in the cost of energy are complex and varied but are not unrelated to instability in the Middle East as well as speculators investing in oil as a commodity; increased fuel usage in the United States due to some extent to the lack of a realistic national conservation program; and increasing demand for energy world- wide, particularly with the rapid economic development of major third world economies including India and China.

In a survey for AARP, nearly 90% of those questioned blamed the high profi ts of the oil companies for the spike in oil prices over the last few years (Povich, 2005). This survey also found that homeowners try to take some steps to cope with these soaring energy costs that can threaten the health of many older persons. For example, almost two thirds of the householders take steps to conserve energy, such as turning down thermostats to lower room temperatures. But room temperatures too low for the comfort of older people can result in hypothermia—a physical condition that if extended too long can result in

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128 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

physical harm or even death. More about hypothermia, and heat exhaustion, is discussed in Chapter 3.

Housing Concern: Safety

One of the key aspects of the housing conditions of older people is physical safety. This is particularly important in preventing falls. In northern climates, one typically relates falling to snow or ice-covered walkways and steps. And, indeed, thousands of people— including many older persons—fall every winter, resulting in severe consequences. But it is inside the home where large numbers of older people fall every year. (“Avoiding Slips and Falls in This Holiday Season,” 2005).

According to home safety experts, there are key remedial steps that older house- holders can take to dramatically enhance their safety at home. One of the most dangerous rooms in an older person’s home is the bathroom. Falls, slips, and scalding water are all major risks. Among recommendations to make bathrooms safer are adequate lighting, with some light on throughout the night; strategically positioned grab bars, especially around the bathtub, shower, and toilet; nonslip surfaces on the bottoms of bathtubs, showers and bathroom fl oors utilizing nonslip surfaces or bath mats with nonslip grip- pers; a cordless phone in bathrooms so those needing assistance can call for help; single- lever faucets; benches in shower stalls or showers with seats built into them; no clutter on countertops or on the fl oors; levers for door knobs on bathroom doors as well as all doors in the home (McClintock, 2006).

There are additional issues regarding safety addressed under “Aging in Place” in the Practical Application at the end of Part III of this textbook.

Staying Connected at Home

Another key factor for older people who live alone is staying connected with the outside world—particularly with close relatives or friends as well as emergency services. With 95% of people aged 75 and older wanting to continue living in their own homes, it is essential that they are able to stay connected for their own safety. Fortunately, continued developments in technology make this possible (Saltzman & Walker, 2008). It all started with Alexander Graham Bell who invented the telephone. The telephone is still impor- tant for keeping people connected, but wireless communications and computing power are also key in this objective. There is a new generation of gadgets that can summon aid, alert people to take their medications, help caregivers keep tabs on an older per- son’s movements, and let doctors monitor vital signs from a distance (Saltzman & Walker, 2008). Experts predict that in the near future, additional technologies will converge to the point where older people, their families, and health care providers will be completely connected. Currently, technological devices used in a home setting by elders can address the following home-living issues:

Emergency pendants that contain a button that can be pressed to reach a 24-hour ■ dispatcher who will notify a relative, a caregiver, or emergency services. Problem Addressed: One third of all older adults suffer a fall each year. About a ■ fourth of those who fall lose some independence due to injury. Pillboxes, pagers, vibrating watches, and dispensers that talk to the patient or ■ alert a caregiver to ensure older patients take their medications. Problem Addressed: Up to 40% of nursing home admissions result from an inabil- ■ ity to take medications at home unsupervised.Co

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9. HOUSING OPTIONS FOR OLDER PEOPLE 129

Motion detectors and small TV cameras attached to computers or TV sets to reas- ■ sure family members and caregivers that the older person needing assistance is carrying out his or her daily routine. The small TV cameras enable family mem- bers to visit via the Internet. Problem Addressed: About 7 million adults live at least an hour from a parent ■ they are caring for, the National Institute on Aging estimates (Saltzman & Walker, 2008).

ADAPTING/BUILDING HOMES FOR OLDER PEOPLE

All of the concerns outlined previously relate to new ways to build new residences or adapt existing homes for the physical needs of people as they grow older. Increasingly the focus of architects, developers, homebuilders, and remodelers is building or adapting homes to address the needs of an aging population. In one survey of some 500 fi rms, 74% reported “greater accessibility” as a growing trend in home design (Olubayo & Brown, 2007). Americans aged 55 and older purchase one in fi ve of all new homes built in the United States, according to the National Association of Home Builders (NAHB).

A voluntary certifi cation process has been developed for builders committed to con- struction that makes a home cost-effective, accessible, and convenient for people of all ages. It is called the Easy Living Home Program. In addition, AARP and the NAHB have also created a joint awards program—the Livable Communities Awards for Builders.

REVERSE MORTGAGES

Reverse mortgages are loans to older householders that are secured by the value of their homes and do not need to be paid until the borrower dies, sells the home, or moves out permanently. In order to obtain one of these mortgages, a borrower must be at least 62 years old and own the home. The house must be a primary residence. There are no income requirements for this type of loan.

Types of Reverse Mortgages

There are two types of reverse mortgage loans: (a) the Home Equity Conversion Mortgage (HECM), which is backed by the federal government, and (b) private reverse mortgages that do not have federal mortgage insurance. “The HECM is still the gold standard,” said Shelley Giordano of Wells Fargo Home Mortgage. “It’s the most versatile product and the best for most people,” (Gandel, 2008, p. 12). Older homeowners turn to reverse mort- gages for a variety of reasons according to an AARP study released at the end of 2007. These include paying off existing mortgages, paying for prescription drugs, improving the quality of their lives, and paying for home health care, which is the top reason.

But a reverse mortgage is not for everyone. Some even call it the loan of last resort. Some experts think these loans may be best for persons in their 70s and 80s, but they may not be as good for persons in their 60s because they could outlive their resources in their later years that would leave them with little or nothing upon which to rely. In addition, these loans are expensive and the amount one owes increases every month. In fact, an AARP study found that the expense of this type of loan—between 8% and 10% of the home’s value—is the main reason many potential borrowers decide against reverse mortgages (Gandel, 2008).

The market for these loans is expected to swell with the oldest Baby Boomers hav- ing reached age 65 in 2011. The U.S. Senate and House of Representatives both passed

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130 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

legislation in 2007 to 2008 to update the HECM program, which was designed to make these loans more accessible.

TAX RELIEF PROGRAMS FOR HOMEOWNERS

Most of the states have some form of property tax relief program for older persons. They may be called circuit-breaker programs or homestead exemptions. Circuit-breaker programs provide tax cuts or refunds to older homeowners when property taxes go above a cer- tain percentage of their household income. Homestead exemptions are usually fi xed-per- centage reductions in the assessed valuation of an older person’s primary residence. For example, when property taxes are raised by a special millage election for schools, many older homeowners pay just a little extra in taxes if these programs are in place.

THE SINGLE-FAMILY HOME

In the later years of the 20th century and the early years of the 21st century, single-family homes increased in value at a rather remarkable rate. But this upward trend came to an abrupt end beginning in 2007 and in the Great Recession of 2008 to 2009. Home prices fell generally across the nation, with rather dramatic declines in specifi c regions along with widespread home foreclosures. But for many older persons, home values increased because of the length of time they owned their homes—often 20, 30, 40 years, and more. In spite of the major housing crisis of 2008 to 2009, the single-family home has been one of the best investments the average older Americans have made. The true fi nancial value of home ownership needs to be measured by the equity an older person has in a home. If older people were to sell their homes and invest the equity in secure investments, they might realize enough monthly return to pay for other forms of housing that are more suitable to their needs. The current tax laws permit a once-in-a-lifetime sale of a person’s home after the age of 55 on which they do not need to pay any federal tax on a capital gain up to $500,000. The older person selling his or her home and investing the equity can have the benefi t of a monthly (or quarterly or yearly) income and the security of having the money available. The only question is whether the equity market is a safe investment vehicle for older persons given what happened to equities when their value dropped by about 40% between October 2007 and January 2009.

The Impact of the Housing Bubble on Retirement Security

Between 2000 and 2007, house prices rose 60% before the housing bubble burst in the Great Recession (Munnell & Soto, 2008). A major study by the Center for Retirement Research at Boston College showed that an increase in housing prices as a result of the housing boom led to increases in debt and to increased consumption—people bought a lot more things. This was done by extracting equity from their homes—obtaining cash by taking out second mortgages and lines of credit. Indeed, older householders, with most other responsibilities out of the way, are more likely to take out equity from their homes than are other people (Munnell & Soto, 2008).

Impact of Extracting Equity From Homes

Taking money out of the equity in one’s home, according to research, directly impacts retirement fi nancial security in a period of declining home prices and fl uctuating stock market values. It is estimated that for those householders who took equity out of their Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

9. HOUSING OPTIONS FOR OLDER PEOPLE 131

homes from 2001 into 2008 and continued to consume, their net worth was 36% less on average than the net worth of householders who did not extract home equity (Munnell & Soto, 2008). Overall, many householders reacted to the very large growth of the price of houses by increasing their debt. The danger is that when housing booms (with rapidly increasing house prices) are followed by housing busts (with falling home prices), too many homeowners will have borrowed against gains they may never obtain. That is why “bubbles” can negatively impact the retirement balance sheets of older persons.

As a result, Munnell and Soto pointed out that increases in mortgage debt have affected the retirement readiness of many householders. Some 30% of older household- ers took out money from their home equities. The housing boom provided some fi nancial liquidity (ready cash) for many older householders, but, as the researchers stated, “a signifi cant portion of those entering retirement today—and perhaps over the next several years—will have a fragile balance sheet in a time of depressed home prices and poor fi nancial market returns” (Munnell & Soto, 2008, p. 8).

Fear of Foreclosure

The downward spiral of the housing market combined with the fl uctuations in the fi nan- cial markets has led to the reality of older people facing the loss of their homes through foreclosure. Many older Americans refi nanced homes using risky mortgage instruments. The founder of the nonprofi t Homeowners Options for Massachusetts Elders pointed out that owners of homes who were aged 75 and older were the fastest-growing group of people who refi nanced (Fleck, 2008). Many fell for predatory refi nancing that included interest-only loans and adjustable rate mortgages. The same nonprofi t organization noted that more than half of its clients face the loss of their homes. An AARP survey indicated that persons aged 50 and older hold 41% of all fi rst mortgages in the United States. Of this group of persons, some 684,000 are delinquent on their mortgages, in foreclosure, or have already lost their homes (AARP Policy Institute, 2009).

Another downside of the collapse of home prices in so many areas of the nation is that many parents are being asked to help adult children who have been stuck with mortgages they could not afford (Fleck, 2008). For example, the executive director of the Las Vegas Area Legal Services said that 90% of her clients had mortgages that were as much as tens of thousands of dollars more than the value of their homes, a condition that has been com- mon across the nation (Fleck, 2008). The chief economist of Moody’s economy.com said, “Not since the Great Depression [of the 1930s] have so many people had their homes worth less than they paid” (Fleck, 2008, p.14). The story was reported of a couple in Lawrence, Massachusetts, aged 64 and 62, who refi nanced their home of 30 years to obtain cash to supplement their fi xed income. They got behind in their payments on the loan and faced losing the home. As a result they said, “We’re not eating well or keeping warm. We keep our heat at 50 to 55 degrees and stay upstairs because it’s warmer. We eat eggs, canned soup, and potatoes. I only buy the cheap ham and cheap cheese” (Fleck, 2008, p. 14).

APARTMENTS

One of the options for older people who decide to move from their single-family home is to move to an apartment. Many styles of apartments are available in a variety of price ranges. For the older person, apartment living can be attractive because it transfers the responsibilities of property ownership to someone else. A person’s commitment is usually for a fi xed period of time, typically a year at a time. This can be an advantage or a disad- vantage. During the rental year, housing costs are fi xed so the person can budget housing Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

132 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

costs with no surprises, such as the need for a new roof or furnace or escalating taxes or utility costs. However, at the end of the year’s lease, the price of the apartment may go up. If apartments have been overbuilt in an area, rents tend to be much more stable, so it is important to be familiar with the apartment market. It may be possible for an older person to get a longer term commitment for a fi xed amount of rent, or, if not a locked-in price, at least a cap on the yearly increase. Because so many older people live on some form of fi xed incomes, price stability for their housing can be a key factor in their ability to survive fi nancially. On the other hand, if for some reason they become dissatisfi ed with their apart- ment, yearly leases give them the fl exibility to move to a living unit that they like better.

Many elderly people feel they lose privacy in an apartment setting. Others feel loss of ownership or control. Still others cannot come to grips with a drawer full of rent receipts. They believe this is money “down the drain.” However, for many older persons, apartment living can be an economical way to obtain tax-free equity from the sale of the old homestead, as well as to get out from under the escalating cost of taxes, insurance, utilities, and maintenance associated with keeping their own homes.

Possible Problems With Apartment Living

In towns and cities across the nation, developers have been buying buildings contain- ing apartments by the tens of thousands in order to convert them into condominiums— “condo conversions.” For example, the wave of these conversions began back in 2004 with more than a quarter of a million apartments taken out of the rental market by the end of 2005, according to the National Associations of Realtors (Basler, 2006).

Experts say that no matter how stable a rental apartment building may seem, the tenants are always vulnerable to the threat of a condo conversion. Sometimes the renters are able to stay in their rental/condo unit if they can afford to buy it. But many older rent- ers living on fi xed incomes with limited savings or investments cannot afford to buy their converted unit, which then forces them to move—some after many years in what they thought was a secure home. And research has shown that moving for many older people negatively impacts their physical and mental health. As William Apgar, a senior scholar at Harvard University, stated, “For seniors to face an unknown future, to have lives dis- rupted this way, literally makes some ill. And where do they go? Move in with their kids or a relative? Go to a nursing home? This is incredibly stressful” (Basler, 2006, p. 17).

There are no federal laws that regulate condo conversions. And state laws vary widely. Some cities have regulations, but these regulations often do not achieve the goal of keeping older renters in their homes. Most existing regulations only require the own- ers to notify the tenants of the changes, offer them the right to purchase their units, and give them adequate time to relocate. A Harvard University housing expert suggests that Baby Boomers need to plan ahead so that they do not get caught in this conversion bind. One way to do this is to have the tenants band together to buy the building while they are still younger and make it a cooperative effort with the stipulation that if they move, they will sell only to new residents at affordable prices. Otherwise, the next big wave of condo conversions will hit Baby Boomers and put some of them at risk (Basler, 2006).

CONDOMINIUMS

Condominiums, or “condos,” are a form of real estate ownership. They can take almost any form of housing unit from detached single units on the ground level to “cubes” or apartments in high-rise buildings. They are housing units that are individually owned but part of a multifamily housing sitting on common grounds that typically have support

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9. HOUSING OPTIONS FOR OLDER PEOPLE 133

facilities and recreational facilities. Condominium owners are real estate owners. They own (or are buying) the housing unit they live in, plus a fractional share of the com- mon grounds and facilities. Owning a condominium is just like owning one’s own house except the condo owner generally does not do the maintenance and repairs and is partial owner of the common areas. The condo owner pays a fee that covers the cost of ongo- ing maintenance and repairs. As a property owner, a condominium dweller can obtain a mortgage on his or her property, deduct the interest she or he pays on the mortgage from their tax returns, pay real estate taxes, and sell the property.

For many older persons, condominium living combines the benefi ts of living in an apartment-type setting with no responsibility for grass cutting, snow removal, and other chores (except for monthly and yearly fees) associated with home ownership. There are no rent receipts. The living unit is owned by the resident, which means it can appreciate or depreciate in value.

MOBILE HOMES

Mobile homes can be very appealing to some older people. They are an affordable hous- ing option that gives them the feeling of a secure living environment if they are in a mobile home park that they enjoy, while at the same time allowing them the indepen- dence and privacy of a single-family home. The purchase price of the mobile or manufac- tured home does not typically include any of the costs associated with getting the home ready for occupancy.

A major problem in mobile home parks where the lots are rented by the residents has been the spiraling costs of monthly rentals. This has been particularly true for prime recreational areas of the South and Southwest. As these rentals prices tend to increase, many older persons have been forced to sell because they could no longer afford the monthly rental fees for their mobile home lots.

Most parks will not accept older mobile homes. Even if they were to fi nd a park that would accept older mobile homes, many older persons on modest, fi xed incomes simply cannot afford the expenses involved in moving a mobile home. Another major consideration for mobile home dwellers is restrictions. Most parks have some restric- tions. Some are so restrictive that residents are not permitted to wash their cars or have visitors overnight.

Another type of mobile home park is one in which the residents own the lots on which their mobile homes are placed. These parks are generally co-operatively managed and have co-operatively owned recreational buildings and services. Some even have their own fi re departments and emergency paramedical units, such as Trailer Estates in Manatee County, Florida. There the elderly residents participate directly in the decision- making processes of operating the park. There is no “rent” to pay each month beyond the service charges. This type of park cannot be sold unless there is a cooperative deci- sion by the park’s resident owners. As a result, resident owners of a co-operatively owned mobile home park generally are in a better position to control their own living environments.

COHOUSING

Cohousing can take two forms. One is homesharing where unrelated persons share one home. Another form of cohousing is where a group, typically made of strangers, develops a communal-type housing unit with separate units with shared common space (Abrahms, 2011).

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134 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

Homesharing is a concept that is developing rapidly in some sections of the nation. It is economical because it signifi cantly cuts the homeowner’s housing costs. But it is not easy for many older (or younger) persons to have some strangers move into their homes. For some, it is a way to keep their home and have companionship at the same time. The most important part of homesharing is matching appropriate persons. Even for people who are generally compatible, inevitable differences and tensions may arise.

Information on homesharing can usually be obtained from a local Area Agency on Aging, or from the National Shared Housing Resource Center. Homesharing makes it possible for many older people to exchange an important resource they have—their home—for services they need.

In the other form of cohousing, a group may purchase the property, mutually design it, develop the rules, and manage it. The residents may sometimes eat together. In 2011, there were more than 112 intergenerational cohousing communities with an additional 40 to 50 in the planning stage. Over half were in California (Abrahms, 2011).

ACCESSORY APARTMENTS

Accessory apartments are private living quarters, which include a sitting and sleeping area, a kitchen, a bathroom, and sometimes a separate entrance in existing single-family homes. It is an independent apartment within a single-family home. These are sometimes referred to as mother-in-law apartments. Historically, some of the antebellum plantation homes of the South had mother-in-law apartments separate from the rest of the family. The object of this type of apartment is to provide secure living arrangements for older persons close to the family so that family members can help care for the older person, while still maintaining the privacy and independence of a person’s own living space.

Residential zoning can be a problem in developing an accessory apartment in sin- gle-family zoned neighborhoods. It may be possible to deal with zoning restrictions in communities through revised zoning ordinances, zoning variances, licensing, or special- use permits. Each community deals with this issue in its own way. Zoning ordinances for accessory apartments are usually more lenient in rural areas.

ECHO: ELDER COTTAGE HOUSING OPPORTUNITY

Elder Cottage Housing Opportunity (ECHO) refers to small, freestanding, removable housing units placed on the sides or backyards of single-family homes to provide private, independent housing for elderly parents to be close to the homes of adult children. This enables adult children to care for the daily needs of dependent elderly parents without leaving their own property. It has the advantage of maintaining the privacy and inde- pendence of each family unit. The older folks do not have to listen to their grandchild’s stereo, be in the way when their adult children entertain, or deal with all the other incon- veniences of two families living together in the same home. They can go to bed as early or late as they wish. The traumas and adjustments necessary when the old folks move into the home of an adult child are avoided.

PUBLIC HOUSING

The concept of public housing came about in President Franklin D. Roosevelt’s New Deal with the passage of the Housing Act of 1937, 2 years after the passage of the Social Security Act. It was not until 1956 that the Housing Act was amended to provide public housing specifi cally for the elderly. Through its various sections, public housing for the

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9. HOUSING OPTIONS FOR OLDER PEOPLE 135

elderly has been cooperatively provided through federal governmental loan programs to municipalities, religious organizations, private investors, and various social agencies.

Forms of Public Housing for the Elderly

Public housing has been developed primarily through two provisions. One is Section 202 of the Housing Act enacted back in 1959. Through this section of the law, long-term loans are made to nonprofi t organizations to develop multifamily housing complexes for elderly and handicapped persons. The program was suspended in 1969 after much opposition. It was revived in 1974 as part of the Housing and Community Development Act.

Rents are limited to 20% of a person’s income. Section 202 housing was designed to make sure that elderly residents had access to a variety of services that enable them to live independently, such as the availability of meals, transportation, personal assistance, and housekeeping (Cox, 2005). Residents need to be age 62 and older with income below 50% of the area’s median income. A major problem is lack of supply of these types of units.

Section 8, created by the Housing and Community Development Act back in 1974, is a program designed to provide subsidized rent to low-income households, including elderly people. In this program, money is provided through the Department of Housing and Urban Development (HUD) to landlords for persons who can show fi nancial need to make up the difference between 30% of a person’s income and what is considered fair-market rent. In this program, the tenants can choose their own rental units (within price ranges) in a wide variety of rental housing styles, including apartment buildings, duplexes, single-family homes, and others.

SINGLE-ROOM OCCUPANCY

Single-room occupancy (SRO) is a living arrangement that many older persons would not choose. It refers to those single rooms that people of any age occupy in inner city hotels and rooming houses, usually with a shared or common bath and no kitchen. For many years, research has indicated that older persons typically occupy a large percentage of SROs (Harris, 1990). The development of urban renewal projects back in the 1960s fi rst brought this population to light. Typically, SROs have been located in old hotels in the inner city or in rural areas. SROs can be undesirable housing units for many reasons. They can be generally substandard in quality, with no private bathrooms, no adequate cooking facilities, no common area, and no regular meal ser- vice. Many of these old rooms were designed for transient stays, not for long-term residences.

ADULT FOSTER CARE

Another housing option for the elderly is called adult foster care. It is primarily for func- tionally impaired older persons. Similar to foster care for children, these homes are typi- cally operated by families in their own homes and provide care for a small number of older adults. The care provided usually includes room and board, assistance with activi- ties of daily living, and overall supervision.

Licensing varies by state with some states having no provisions for licensing. Often adult foster care homes can be more fl exible than nursing facilities and feel more like a family home.

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136 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

LIVING WITH ADULT CHILDREN

Many people believe that families today are quite different from the families of earlier times. Obviously many things have changed, such as high technology applications, higher divorce rates, and fast-paced lifestyles; but contrary to common belief, what has not changed in American family life are intergenerational living arrangements. Many people feel that they have an obligation to automatically move their aging parents into their own homes when one parent becomes widowed or is not capable of maintaining his or her own home. Many people feel this is the way it was done in earlier periods of our history. One of the pioneers in gerontology, Clark Tibbitts (1968), noted that the three-generation family, where the old parents moved into the home of a nuclear family, has been relatively rare. Even in American colonial times, the three-generation family was an exception. The historical evidence for this comes from examining family wills in Plymouth Colony (Demos, 1965). Another study of family life in Massachusetts in the 17th century noted the difference between the family of residence, which was mostly nuclear, and the family of interaction or obligation (Greven, 1966). This was a kinship group of two or more generations living in a single community, not a single house.

The Value of Independence

Whether people live in separate homes, apartments, condominiums, mobile homes, or any other type of housing units, most value some degree of independence with the ability to rely on family members living nearby. In our culture, for the most part, there has never been an emphasis on older people moving in with grown children and their families unless it was really necessary. Arranging for an independent living situation for older parents is not abandoning them. In most instances, it is best for both parties, the older people and their adult children.

Key Questions Before Moving a Parent Into an Adult Child’s Home

Before an elderly parent is invited to move into the home of an adult child, it is helpful to raise the following questions:

Can they tolerate each other’s lifestyle? Different generations have different ■ tastes in food, music, TV watching, and a range of other activities. Can they relate to each other as mature adults? The aged parent and the middle- ■ aged child have lived apart for many years. The adult child is not the same per- son who left his or her parents’ home years before. In a close living situation, differences can become evident and tensions can surface easily. Does the home have enough space? Physical space and adequate privacy are ■ essential if an aging parent is to live successfully with an adult child.

RETIREMENT COMMUNITIES

For many years, retirement communities have been described as places where people move when they retire. This does not mean that no resident in a retirement community works, but rather that the residents typically have retired from their primary job and have relocated to a retirement community.

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9. HOUSING OPTIONS FOR OLDER PEOPLE 137

Types of Retirement Communities

Retirement communities typically have included mobile home parks, high-rise senior housing complexes, leisure villages, or other forms of housing units. Among the largest and most elaborate retirement communities are Sun City, Arizona, and Leisure World, California, which have been in existence for many years. An elaborate range of amenities and services to meet the wishes and needs of retired persons continue to be found in these villages. Housing options, recreational facilities, medical assistance, houses of worship, and a range of educational opportunities seem to have had no limit in this type of retire- ment environment (Stevey & Associates, 1989).

As Baby Boomers continue to move into their later years (aged 65 and older), experts contend that they will shape the future of retirement housing. As John McIlwain, senior fellow at the Urban Land Institute, stated, “They [Baby Boomers] have changed expecta- tions for every decade they’ve gone through; I don’t think it will stop now” (Abrahms, 2011, p.10).

One variation is something called niche communities where “people live with others who share similar lifestyles, backgrounds or interests” (Abrahms, 2011, p. 12). In 2011, there were some 100 of these communities across the nation. They range from RV parks for artists and university-/college-based housing units, to the pricey Rainbow Vision in Santa Fe, New Mexico, focusing on—but not exclusively—lesbian, gay, bisexual, and transgender (GLBT) residents (Abrahms, 2011). With some 3 million GLBT older Americans, a number projected to nearly double by 2030, this type of housing focus can provide vital supports as these older persons may not have adult children to care for them (Abrahms, 2011).

SUGGESTED RESOURCES

Elder Cottage Housing Opportunity (ECHO): http://www.seniorliving.about.com/od/ housingoptions/a/echo.htm

This site describes what ECHO housing is, its benefi ts and challenges, and where to get more information about it.

National Association of Housing Cooperatives (NAHC): http://www.coophousing.org Incorporated in 1960, the NAHC is a nonprofi t national federation of housing cooperatives,

mutual housing associations, and other resident-owned or controlled housing, professionals, organizations, and individuals interested in promoting the interests of co-operative housing communities.

National Shared Housing Resource Center (NSHRC): http://nationalsharedhousing.org The NSHRC is a clearinghouse of information for people looking to fi nd a shared housing

organization in their community or to help get a program started. The site has a directory of programs by state, and a list of regional representatives with contact information.

Reverse Mortgages: http://www.ftc.gov/articles/0192-reverse-mortgages The Federal Trade Consumer (FTC) is the nation’s consumer protection agency. This website

provides information on how reverse mortgages work, the types of reverse mortgages avail- able, and how to get the best deal.

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http://www.seniorliving.about.com/od/housingoptions/a/echo.htm

http://www.coophousing.org

http://nationalsharedhousing.org

http://www.ftc.gov/articles/0192-reverse-mortgages

http://www.seniorliving.about.com/od/housingoptions/a/echo.htm

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1CHAPTER

139

Economics of Aging: Work and Older Persons

The learning objectives of this chapter include understanding

That the economic status of older people varies greatly depending on income levels, ■ personal wealth, savings, and sources of income. How poverty and near poverty are still threats to some older people. ■ That Social Security as a federal program has been, and continues to be, a key compo- ■ nent in the economic lives of a majority of older persons in the United States. That the attacks on Social Security, Medicare, and Medicaid have existed since the incep- ■ tion of these programs and how they continue as part of ongoing political debates. Why more older persons are continuing to work or trying to fi nd paid employment and ■ the signifi cant obstacles they encounter as a result of the Great Recession and myths about older workers.

ESTHER: THE UNPAID WORKER

Esther was the second of six children. Her fondest dream as a youngster was to be a schoolteacher. But her family was a working family and she was expected to contribute to the family income as soon as she was able, which in her case was after completing 10th grade at age 16. This was how it was for working-class families in America in 1920. Only a privileged few actually went on to college.

Esther got a job in an offi ce and by the age of 21 was the manager of the accounting section. By the age of 23, Esther married and she continued to work until the birth of her fi rst child. She helped her husband start his own business, a small contracting fi rm. Esther kept all the records, paid the bills, computed the taxes, and managed the payroll when the company added employees as time went on.

She continued to do this even after the birth of two more children. The Great Depression of the 1930s sent their business reeling for a few years, with very little work and income. World War II also interrupted the contracting business as Esther’s husband entered a war plant for 3 years and left the business for a time.

139

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140 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

After World War II, things began to pick up and the business fl ourished. Once again, Esther was key to all the offi ce procedures of the business. In addition, she managed a store that she and her husband started to furnish needed household products to returning servicemen and their new families (the beginning of the Baby Boom).

Because their businesses were small and often struggling, Esther was never a paid employee. No Social Security taxes were ever withheld for her. Because they lived and worked at a time when wages and prices were very low by today’s standards, Esther and her husband never were able to save any amount of money that could produce income in their later years—especially extended later years, as she and her husband lived into their 90s.

During all her busy years, Esther was a homemaker, raised her three children, volunteered in the community and in her church, cared for her elderly parents until they died in their early 80s, and worked in the family business. For all of these activities lasting over 45 years, she received no public or private pension. Her only reward was to get 50% of her husband’s Social Security ben- efi ts based on his earnings and work record, which ended years ago. Needless to say, she and her husband ran out of money as they continued to grow older, spending increasingly more money on medical expenses in spite of Medicare, and spending more on personal assistance as they did less and less for themselves.

Esther was one of the more fortunate elderly Americans. If she had been member of a minor- ity group, widowed earlier, never married, or divorced, her fi nancial situation would have been more desperate.

PARADIGM SHIFTS IN THE ECONOMICS OF OLDER PEOPLE

If ever there were a chapter that highlighted major paradigm shifts in the status of older Americans, this is one. Overall, the elderly population has experienced signifi cant gains in overall economic status since the inception of the Social Security Act of 1935. Widespread poverty, unemployment, and economic vulnerability in the Great Depression of the 1930s provided the stimulus to develop programs that would provide some economic stability to the lives of older Americans. A detailed discussion of Social Security is provided later in this chapter.

New Threats to Income Security

Tremendous gains in the overall economic status of older persons have been evident since the implementation of Social Security and the cost of living adjustments that were included in the Social Security Amendments of 1972. But once again, in spite of the overall economic gains of older people since the Great Depression of the 1930s and the still high poverty rate for the elderly as recent as 1959, many older persons again face economic hardships as the result of the Great Recession of 2008 to 2009. With the plunge of equity markets (stocks, bonds, and other investments) in 2008 to 2009, and the col- lapse of the housing markets in most sections of the nation, many persons in their early to middle 60s have been forced to postpone their retirement plans if they are able to keep their jobs, or drastically scale back their standard of living. One bright spot in all the economic downturns of this 2008 to 2009 era is the reality that President George W. Bush was not able to privatize Social Security funding following his pledged objective in the 2004 presidential election. As a result, the Social Security Trust Funds were not negatively impacted by the collapse of the equity and housing markets in 2008 to 2009.

Numerous stories, as well as statistics, describe the economic plight of many Baby Boomers and elderly (those aged 65 and older) persons as a result of the Great Recession. The story is told of Jeanne Phillips of Badon, Pennsylvania, who planned to keep working as long as she could, even after two heart attacks, because she needed the money to survive C

op yr ig ht @ 2 01 4. S pr in ge r Pu bl is hi ng C om pa ny .

10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 141

(Fleck, 2009). And Frank Wilkinson, 89, of Clearwater, Florida, worked about 25 hours a week to maintain himself because he lost his pension from the airline he worked for after it went bankrupt (Fleck, 2009). David Sinclair, 62, of Rio Rancho, New Mexico, who retired in 2007, was confi dent that his savings of $500,000, in addition to a government pension, would be enough to support him and his wife throughout their retirement years. But the value of his investment savings dropped 33%, and he has ended up back at work (Carpenter, 2009).

In fact, Standard & Poor’s 500 lost 55% of its value from October 2007 to March 2009 (Carpenter, 2009). Millions of people in their 60s, 70s, and 80s found the reality of retire- ment changed because of economic reasons (Fleck, 2011b). They continued to work if they were able to retain or fi nd jobs because they needed the money to support themselves. Using data from the Bureau of Labor Statistics, Whoriskey (2012) reported that the per- centage of workers over 65 has increased faster than any other age group.

DIVERSITY OF ECONOMIC STATUS

In spite of what has occurred since the Great Recession of 2008 to 2009 (many trace its onset to the decline in housing prices in 2007), there is real diversity in income and over- all wealth (or lack of wealth) among older people (aged 65 and older) and the emerging old (aged 55 to 64). There is obviously a long list of elderly persons in the United States who are among the wealthiest people in the nation and the world. This would include persons who have developed, owned, and/or run major corporations and equity fi rms. On the other end of the spectrum are many impoverished older people, who in spite of Social Security, Medicare, and other specifi c age-related benefi ts, still struggle to pay for the basic needs of life.

Although net worth or overall wealth is an important concept in assessing the eco- nomic status of older persons, determining the levels and sources of incomes of elders is vital to understanding their ability, or lack of ability, to cope with the costs of daily living throughout the aging process. Diversity of income levels among older persons in the United States prevails. Some older persons have high incomes, some have poverty-level incomes, and many are somewhere in the middle ranges. In 1959, 35% of older adults lived below the poverty line (Older Americans 2010). But looking just at the percentage of older people living below the poverty line, for example, does not provide a complete picture of their economic situations. Looking at the income distribution of persons aged 65 and older and their median income gives a better view of their economic well-being. Since 1974, the proportion of older people living in poverty and in the low-income group generally declined so that by 2007, 10% of the older population was in the low-income category (Older Americans 2010). At the same time, people in the middle-income group made up the largest share of older people according to income groupings (33%). And the proportion of those in the high-income category increased from 18% in 1974 to 31% by 2007 (Older Americans 2010). The following chart (Figure 10.1) illustrates the distributions of income by categories among the elderly.

Income Differences

Among older people, poverty rates vary greatly according to sex, marital status, work history, and race. The roles of wives, homemakers, nurturers of children, caregivers for ill family members aging parents, and volunteers in the community, the church, and the school have occupied the lives of countless American women who are currently elderly. Unless wives who do not work outside the home inherit a large amount of money or win the lottery, their retirement income is typically dependent on their husbands.

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142 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

Although the percentage of women who work outside the home has increased dra- matically in the last four decades (from 43% in 1970 to 60% in 2010), research indicates that there are still major pitfalls for women as they begin retirement today, or contem- plate it in the future (Fleck, 2011a). Women who are in the paid labor force earn about 77 cents to a man’s dollar. For those who interrupt their work histories to raise children, care for aging parents, or volunteer, there is less work time to build up Social Security credits or 401(k) pensions (Locke, 2011). Not surprisingly then, women generally start saving later in their lives, and then do not have enough savings to fi nance their retire- ment years (Choi, 2008). As women generally have more retirement years to fi nance, all these, as well as other factors, put them at a fi nancial disadvantage in their later years.

Race and ethnicity are also directly related to income differences among older persons. For example, older non-Hispanic White men are far less likely than older Black American men and Hispanic men to be living in poverty—about 5% compared to 17% for older Black American men and 13% for older Hispanic men (Older Americans 2010). And signifi cantly, older non-Hispanic White and Black American women have higher poverty rates than their male counterparts (Older Americans 2010).

A major study by the National Academy on an Aging Society points to specifi c indicators that threaten the retirement security of people of color (Hudson, 2005). These include low wages, spotty work histories, family responsibilities, inadequate pension coverage, poor fi nancial literacy, and discrimination. Working people of color are more likely to be forced out of the labor market due to not being able to keep or fi nd work. And according to the National Academy report, at the same time, people of color are often less able to retire because of a lack of adequate savings or pension income. In short, they, too, often cannot work, but they cannot afford to retire.

Year

P e rc

e n t

100

1 9 7 4

1 9 7 6

1 9 7 8

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 7

High Income

Middle Income

Low Income

Poverty

FIGURE 10.1 Income Distribution of the Population 65 and Over, 1974–2007.

Note: Income categories are derived from the ratio of the family’s income (or an unrelated individual’s income) to the cor- responding poverty threshold. Being in poverty is measured as income less than 100% of the poverty threshold. Low income is between 100% and 199% of the poverty threshold. Middle income is between 200% and 399% of the poverty threshold. High income is 400% or more of the poverty threshold.

Reference population: These data refer to the noninstitutionalized population.

Source: Older Americans 2010, Table 8a.

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10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 143

Another Measure of Poverty

Overall, the offi cial poverty rate for older Americans has been about 10% for many years, which has been the lowest rate among all age categories. But according to a formula created by the National Academy of Sciences, the real rate is 15.1% for older Americans because the existing formula does not account for the rising costs of medical care as well as some other factors (Short, 2012).

SOCIAL SECURITY

A common denominator of income for the elderly in today’s America is Social Security monthly cash. This program has expanded greatly since 1940, when less than 1% of older people received Social Security benefi ts. By the end of 2011, some 55 million Americans received Social Security benefi ts with 16% relying on it for at least 90% of their total income (Quinn, 2011).

History of Social Security

Social Security was developed to be a “fl oor” or base of income for retired, older per- sons, to be supplemented by other sources of income, such as assets, pensions, or some continued earnings from work. But since the 1960s, Social Security has provided the larg- est share of total income for older Americans. Indeed, the share of income from pen- sions increased rapidly in the 1960s and 1970s but has declined since the mid-1980s. The share of income from working has been the opposite—declining until the mid-1980s and increasing somewhat since then (Older Americans 2010). Social Security came out of the Great Depression of the 1930s as one of the most, if not the most, important achieve- ment of President Franklin Roosevelt’s New Deal. This type of program traces its roots to Europe in the 1880s, where Otto von Bismarck of Germany developed a program to require employers and employees to contribute to a fund, fi rst for disabled workers and then for retired workers at age 65. It should be noted that not many people lived to age 65 at that time. As a result, not much money was paid out in extended benefi ts during that era.

By 1905, France had enacted a similar program for unemployment. In 1911, England also adopted both old age and unemployment insurance plans. Roosevelt followed the outlines of the European plans with these key components:

Government sponsored ■ Compulsory ■ Independently fi nanced ■

Intergenerational Aspects of Social Security

It is an error to view Social Security only as a program for older people. From the begin- ning, it had intergenerational aspects. By providing a base of fi nancial income for retired workers and their spouses, Social Security relieves younger family members from need- ing to support their elderly parents. Younger workers also gain fi nancial security by hav- ing income in place for their spouses and dependent children in the event of their death. In 1956, Disability Insurance (DI) was added to Social Security to replace a portion of a worker’s income when he or she becomes disabled and is unable to work. The Old Age and Survivors Insurance (OASI) and the Disability Insurance (DI) programs together Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

144 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

form the OASDI program, which is intended to replace a portion of a worker’s income upon retirement, disability, or death. Generally referred to as Social Security, monthly benefi ts are based on a person’s work record (years of covered employment), earnings history, and the age at which the fi rst benefi t is claimed.

Scope of Social Security

Social Security payments amount to 37% of the total income of the population aged 65 and older. Earnings provide 30% of total income; pensions come to 19% of total income; and asset income (dividends, interest on savings, etc.) amounts to 13% of total income with 3% coming from other sources (Older Americans 2010).

Studies over the past several decades clearly show that Social Security has improved the economic status of older Americans and helped to alleviate poverty among them (Older Americans 2010; Social Security Administration, 2003). The majority (64%) of OASDI funds goes to retirees, while the remaining portion is split between survivor benefi ts and disability benefi ts (Quinn, 2011). And over half (56%) of those receiving Social Security benefi ts are women.

Importance of Social Security

Many people believe that they would be better off investing their own money for their retirement incomes. The director of research for the Pinnacle Advisory Group has cal- culated that the average wage earner would need to have at least $580,000 in savings to provide a monthly income of $2,170—the average monthly income from Social Security plus infl ation adjustments for this worker (Quinn, 2011). And this private-based income might last only 30 years.

Attacks on Social Security

In recent years, serious questions have emerged regarding the viability, fairness, and desir- ability of the Social Security program. These questions relate to the following issues:

The national debt and annual national defi cits.1. The large number of people living longer.2. The prospect of the Baby Boomers overwhelming the retirement systems, 3. including Social Security, as they continue to retire in the 21st century.

Ever since the Social Security program was enacted in 1935, various politicians, pundits, and so-called experts have opposed and attacked it. Writing in 2011, James Roosevelt, Jr. stated, “Social Security critics have been casting the same aspersions on the program for 75 years” (p. 32). Attempts to alter the program’s basic structure, reduce benefi ts, increase the age to receive benefi ts, privatize the funding, or eliminate the pro- gram altogether go back to the 1926 presidential election in which Franklin D. Roosevelt (James’ grandfather) was running for reelection against Republican Alf Landon who labeled Social Security a “hoax” (Roosevelt, 2011). The 1926 Republican platform dis- missed the program as “unworkable” and stated that it would not be able to pay benefi ts to two thirds of retirees.

Specifi c elites in Washington and Wall Street have made it a goal to reduce, greatly modify, or eliminate support programs such as Social Security, Medicare, and Medicaid. These include some “think tanks,” media fi gures, propagandists posing as economic

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10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 145

experts, and billionaires such as Peter Peterson, a fi nancier who made his money doing corporate takeover deals (Greider, 2009). To do this, Peterson has launched a media blitz and assembled a coalition of think tanks and tax-exempt foundations to produce a report that would lead to caps on Social Security benefi ts. It would also “provoke confl ict between the generations” (Greider, 2009, p. 14).

One of the major criticisms that has been misleadingly leveled against the Social Security program is that it is running out of money, or already out of money, and that it cannot be counted on by future retirees. James Roosevelt, Jr. (2011) and others have pointed out that Social Security is funded out of its own dedicated revenue system—the Social Security Trust Fund—which by the end of 2011 had a positive fund balance of $2.7 trillion, and is expected to increase to $3.7 trillion by the end of 2021. After 2021, the fund balance is expected to decline but still be able to pay full benefi ts through 2033. According to the 2012 Annual Report of the Board of Trustees of OASDI, the program could still pay 75% of benefi ts after that, if no changes are made to its funding. And, Social Security has added nothing to the national debt. In fact, “the Social Security surplus . . . makes the federal defi cits seem smaller than they are—around $200 billion a year smaller” (Greider, 2009, p. 13).

Ignorance About Social Security

Many political discussions, at least since President Roosevelt’s New Deal of the 1930s have focused on the size and role of government—especially the federal government—in the lives of everyday Americans. The presidential election of 2012 certainly was no excep- tion, in part due to the rise of the Tea Party, a group opposed to government programs, particularly entitlements, and various forms of welfare and supports—especially for other people. Professor Suzanne Mettler of Cornell University pointed out in her research that 44% of Social Security benefi ciaries, 43% of those persons receiving unemployment benefi ts, and 40% of those on Medicare say that “they have not used a government pro- gram” (Krugman, 2012, p. 17A). This ties in with the famous cry at a Tea Party rally when someone yelled, “Keep the government out of my Medicare,” apparently not knowing that Medicare is a federal government program.

Paul Krugman (2012), in a New York Times article, based on research by Aaron Carroll of Indiana University pointed out that “the regions in which government programs account for the largest share of personal income are precisely the regions electing those severe conservatives” (p. 17A). These severe conservatives are the leaders trying to reduce or eliminate government programs such as Social Security and Medicare. Ignorance about the Social Security program, including not appreciat- ing that it is indeed a federal government operation, makes it easier for politicians to foment opposition to “government handouts” by persons who do not know the facts.

Privatization

Even though President George W. Bush failed in 2005 to privatize Social Security fund- ing, there are ongoing attempts to revive such a plan. Jane Bryant Quinn (2011), a pro- fessional fi nance expert and prolifi c writer, has noted that “if young people switched their payroll taxes into private accounts, the government would have to borrow $6.15 trillion or more (depending on the details) to keep paying out benefi ts to current retir- ees—which means higher defi cits, higher income taxes, further slashes in spending, or all three” (p. 22).Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

146 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

The Social Insurance Concept

Noted experts in the fi eld of gerontology, such as James H. Schulz and Robert H. Binstock (Schulz & Binstack, 2006), have argued that it is essential to maintain and even strengthen the social insurance programs already in place (such as Social Security, Medicare, and Medicaid) rather than promote radical changes. They have contended that our political leaders and policy makers should be supporting programs that spread the risks people face, instead of making the individual person in our society primarily responsible for taking on the many uncertainties of work and retirement.

These experts have gone on to point out that the public needs to understand that radical changes in our safety-net programs would bring dire consequences for older people, extended families, and accepted lifestyles that are key to the lives of so many Americans (Binstock, 2007). For example, many older people would likely become fi nancially dependent on their families and their local communities without these basic programs. This could result in many more families forced to live in three- and even four-generational households. Many adult children could be fi nancially wiped out by policy changes that would lead them to pay for the daily needs, health care, and long-term care of their parents. People need to understand that providing social insurance programs for older people is really a family and an intergenerational benefi t as these safety-net programs alleviate much of the need for adult children to support their older parents, freeing their incomes to support themselves and their dependent children.

Social Security, as constituted, is considered a right for most workers—rich, mid- dle class, and poor. There is no test to determine if one needs benefi ts upon retirement. Everyone who works and contributes into the system (which is now mandatory for most U.S. workers) earns benefi ts. So the dates each month Social Security benefi ts are recorded are “paydays” for Social Security recipients. They are not welfare pay- ments. Politicians from time to time (including some prominent current ones) think they have a ready answer to the national debt and the annual budget defi cit by control- ling and limiting Social Security benefi ts through capping cost of living adjustments (COLAs), or by means testing—making benefi ts available only to the poor. But means testing would destroy one of the most successful programs of the U.S. Government. Social Security is a contract workers have with their government as well as a contract between generations. With proper management and minor adjustments, it will be a major component of younger workers’ fi nancial future.

Supplemental Security Income

The Supplemental Security Income (SSI) program was authorized as Title XVI of the Social Security Act of 1972. It went into effect 2 years later. It is a cash-assistance program designed to provide a nationally uniform, guaranteed, minimum income for eligible old, disabled, and blind persons. SSI replaced federal assistance to old state-administered poverty programs for the elderly, the permanently and totally disabled, and the blind. Three congressionally mandated goals were part of SSI:

Construct a coherent, unifi ed income assistance system.1. Eliminate large differences between the various states in eligibility and 2. benefi ts. Reduce the stigma of being on welfare by having the program administered by 3. the Social Security Administration rather than state-sponsored welfare offi ces (U.S. Department of Health, Education, and Welfare, 1972).Co

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10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 147

PENSIONS

Pensions are another major source of income for many elderly Americans, but the cover- age is uneven. Five categories of pension plans cover a range of American workers and retirees:

Private pensions (private industry and business)1. State and local public employee pensions2. Federal civilian employee pensions3. Military retirement pensions4. The Railroad Retirement System5.

Changes in Pensions

Private pensions are undergoing major changes. Not introduced in the United States until the end of the 19th century, pensions covered very few workers until the 1940s and 1950s in the post–World War II industrial boom. The typical pension plan was the defi ned-benefi t plan where the worker is guaranteed specifi c retirement benefi ts by the employer. The real change in pension coverage has been a retreat from the defi ned-benefi t approach to defi ned-contribution plans. Defi ned-contribution pension plans are those that allow employees to set aside part of their wages in tax-sheltered accounts for their retirement. Employers may contribute to these plans, but they are not required to do so. The level of a worker’s pension under these plans depends on the amount he or she is able to set aside during working years, as well as the performance of the investment funds. Often these plans are referred to as 401(k) plans, named after the section of the Internal Revenue Code that authorizes them (Lewis, 1992). The defi ned-contribution plans will affect retirees in the future, as they are rapidly outpacing the older defi ned-benefi t plans.

Defi ned-Contribution Plans

The number of defi ned-contribution pension plans has been increasing. Defi ned- contribution plans give workers fl exibility and portability, and provide generally lower costs and fewer investment risks for employers (Campbell & Munnell, 2002). Defi ned- contribution pension plans involve a specifi ed payment out of each paycheck into an employee-specifi c account, to which an employer may or may not contribute a partially or fully matched contribution. Common types of defi ned-contribution pension plans include “401(k),” a profi t sharing “403(b),” and “457” plans. The percentage of the paycheck that is contributed to the account is set out in advance. The exact amount of the pension is not predetermined but depends on many factors, including the amount contributed and the rate of return on the investment of the pension funds. The total amount collected is typi- cally available as a lump-sum payment at the time of retirement, and sometimes may be taken as an annuity (spread out over many years) (Campbell & Munnell, 2002).

Problems With 401(k) Pensions

During the Great Recession, signifi cant problems emerged with the rapid expanse of the 401(k) pension plans. When Congress changed the Internal Revenue Code to include Section 401(k), it believed that this was a way for workers to supplement their compa- nies’ traditional defi ned-benefi t plans and Social Security. These new plans were not expected to become the only source of pension income. However, as time went on, more and more employers looked for ways to get out of funding their defi ned-benefi t plans Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

148 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

(Rutten, 2009). Not many employers bothered to ask their employees if they wanted to swap retirement plans. And not many employers realized that very few employees have the background or ability to manage investments.

Employers rushed to abandon their traditional retirement plans for the 401(k) vari- ety. As a result, more than 60% of all workers rely on 401(k) plans for their pension. The problem is that since the peak of the equity markets in October 2007, 401(k)s have lost a collective $1 trillion in value, which was fully a third of the value of all 401(k)s (Rutten, 2009). In addition, another $1 trillion has been taken away from workers who lost or changed jobs and rolled their 401(k)s into individual retirement accounts (IRAs). In addi- tion to that, 20% of American workers stopped contributing to their retirement accounts and 401(k)s due to the hardships of the Great Recession. And millions of others were forced to make early withdrawals from their accounts due to economic hardships, includ- ing possible foreclosure on their homes, debts, and living expenses. What makes this very serious is the fact that the collapse of the 401(k) experiment is occurring as Baby Boomers are beginning to retire in large numbers. As one observer noted, “welcome to hard times” (Rutten, 2009, p. A15).

The Pension Benefi t Guarantee Corporation

For workers fortunate enough to have remained in defi ned-benefi t plans, there is a rem- edy if their company fi les for bankruptcy. It is a federal government insurance agency that takes over pension payments when a company with a defi ned-benefi t pension plan goes bankrupt. In 2009, the maximum pension benefi t it paid was $54,000 a year for workers who retired at age 65. This amount is adjusted with infl ation. Some 84% of retirees fall at or under this amount (Hawthorne, 2009).

WORK

Among all the paradigm shifts in the aging of America in the 21st century, the trend toward older persons continuing to work beyond what was considered the “normal” age of retirement is a major component. In fact, the percentage of workers over age 65 is increasing faster than any other age group (Fleck, 2009; Whoriskey, 2012). The number of older workers aged 65 and older grew by 24% from 2006 to 2011; more than half of those worked full time (Carpenter, 2011).

A Pew Research Center report stated, “As people live longer, public expecta- tions with retirement are in a period of transition. Given the demographic changes afoot . . . this evolution in attitude is likely to continue for years to come” (Fleck, 2009, p. 18).

Reasons for Older Persons to Continue to Work

The reasons why older Americans are continuing to work or attempting to work vary:

The Realities of Retirement Income. Many older persons are facing the harsh ■ realities of declining pensions, lower than needed retirement savings, rising health care costs, and mounting debt due to a number of factors (Whoriskey, 2012). As the book Working Longer: the Solution to the Retirement Income Challenge states, “Workers have not saved enough money to offset these contractions [the contractions of retirement income]. The only two options are to eat less or work longer” (Fleck, 2009, p. 20).Co

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10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 149

The Option to Work Longer. Policy changes, such as the demise of mandatory ■ retirement laws and the elimination of the Social Security earnings penalty for those who are at full retirement age, have made it more realistic for older persons to continue to work or go back to work as full- or part-time work- ers. According to the Center for Retirement Research at Boston College, 52% of Baby Boomers born between 1948 and 1954 are at risk for being unable to main- tain their standard of living when they retire (Fleck, 2009). In addition, 64% of the Boomers born between 1955 and 1964, as well as 71% of Gen X-ers born between 1965 and 1974, may not be able to retire with much degree of comfort in their lifetimes. As a result, “most people will be able to spend 15 years in retirement, not 30 years,” according to Richard Johnson, a senior fellow who specializes in older-worker issues at the Urban Institute (Fleck, 2009, p. 20). But because life expectancy continues to increase, most people will simply need to work longer. The Vulnerability of Retirement Savings. It is widely concluded that most retire- ■ ment investments, including the 401(k) plans that have supplanted the older retirement-benefi t plans described previously, will continue to be vulnerable to investment market downturns. This is in the context of rising drug and health care costs, which have consistently outpaced infl ation (Fleck, 2009). The Great Recession of 2008 to 2009 has resulted in the loss of some 40% of savings (in investments) for retirees and those about to retire. And even though some invest- ment values regained much of what they lost, these types of fl uctuations are hardest on older workers nearing retirement because they have a short time to recover market losses (Fleck, 2009). Accumulated Debt. Recent studies have revealed that many workers are mov- ■ ing toward retirement with lots of debt. One report entitled, Debt: the Detour on America’s Road to Retirement, pointed out that in the Great Recession, those Baby Boomers who had debt of $25,000 or more rose from 28% to 38%, and those with debt of $50,000 or more rose from 12% to 22% (Fleck, 2009). “Even though you’ve done all the right things, you could still be in trouble,” said Harvey Sterns of the Institute for Lifespan Development and Gerontology at the University of Akron. He went on to say that “We’re in a reset period, where people are going to think very differently about retirement from now on because of the sense of vulner- ability” (Fleck, 2009, p. 20). Personal Satisfaction/Sense of Worth. In addition to the economic issues asso- ■ ciated with older persons continuing to work or seek reemployment, there are other signifi cant reasons for people to work in their later years. Many older per- sons simply enjoy working—being productive (Stengle, 2011). These people have taken real satisfaction in being productive workers throughout their lives, some having begun work in their teen years. As Sara Rix, an AARP strategic policy advisor, stated, “Work is how many of us defi ne ourselves and stay engaged with the world . . . and also how we give back” (Slon, 2007, p. 4). A Rand study found that workers aged 65 and older are healthier than people the same age who are not in the workforce. To many older persons, as well as those Boomers looking ahead in life, stopping work means disengagement, not just from work, but from life (Slon, 2007). Changes in Pension Plans. In various studies, Baby Boomers have indicated ■ that a large percentage of them have not saved enough money or do not have adequate pensions or income to stop working by traditional retirement years because, in many cases, the responsibility for funding retirement is shifting from businesses and the federal government to the workers themselves (Magnusson, Co

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150 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

2006; Whoriskey, 2012). This is happening as traditional defi ned-benefi t pen- sions, which are based on salaries, are being replaced by more unreliable defi ned- contribution pension plans, which require employees to assume much of the risk of investing their pension funds. Only 20% of workers who have any sort of pension participate in a defi ned-benefi t plan compared to a defi ned-contribution plan such as a 401(k) plan (U.S. Census Bureau, 2011). “That shift in retirement fi nancing, combined with the recession, has dramatically increased the incen- tives to work into old age and appears to be reshaping how Americans ride out the later part of their lives” (Whoriskey, 2012).

Realities Facing Baby Boom Workers

In spite of all the trends promoting workers to stay employed into their later years, cur- rent realities of the job market make it diffi cult for many would-be older workers to keep or fi nd suitable employment. This is particularly applicable to Baby Boomers. The reason is that older workers, especially Baby Boomers who have lost their jobs or who want to change jobs or move to part-time work, are encountering a world of work that is in transition.

Many economists have predicted a signifi cant labor shortage with 10 million unfi lled jobs in the future, as millions of Baby Boomers reach retirement with fewer younger workers ready to take their place (Pope, 2007). But until this predicted shortage becomes a reality, many older workers are unable to obtain the kind of employment they want. For example, many older workers who have had good jobs, even some middle- and upper- level managers, can only fi nd jobs that “may not utilize their skills or abilities” (Fleck, 2011b).

Ways to Help Older Workers

Another hurdle for older workers is the reluctance of employers to seek older workers or put in place work practices that meet their needs. An Ernst and Young survey found that 6 in 10 companies expect that the retirement of the Baby Boomers will cause shortfalls of workers, but 85% had no formal programs to retain workers (Pope, 2007). Even though many employers say older workers are motivated, disciplined, and reliable, there is still a reluctance to hire them because many see older workers as more costly, unskilled in technology, and opposed to change.

Some forward-thinking employers have developed innovative strategies to keep and attract mature workers, including short-term projects, sabbaticals, telecommuting, job sharing, seasonal work, labor pools made up of older workers, two-location jobs to satisfy migrating “snowbirds,” and phased retirement (in which work hours are scaled back).

Strategies for Older Workers to Keep or Obtain Jobs:

Do not quit a job; line up a new job before leaving a job. ■ Go back to school to acquire training in a needed skill. ■ Retrain in a skill area so skills can transfer to another job, such as an auto mechanic ■ retraining to be a marine repair mechanic. Think ahead to prepare for alternative jobs before leaving the workforce by ■ improving skills or fi nding ways to diversify the current job (Pope, 2007).

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10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 151

Myths About Older Workers

There are many misconceptions about older workers that have been dispelled over the last 20 years (AARP, 2000). Many of these misconceptions persist into the second decade of the 21st century. These misconceptions include that “they get sick more, have poor attendance, expect high wages, lack ambition or are technology-impaired” (a particularly galling stereotype for a generation that invented computers; Fiore, 2011).

PROBLEMS FACING OLDER WORKERS

Older workers face a range of issues including:

Unemployment

Even though the jobless rate for older workers following the Great Recession was lower than the rate of the total workforce, mature workers lost jobs at a faster rate than the over- all labor force (Fiore, 2011). In addition, joblessness for older workers has doubled since the recession began, according to data from the Bureau of Labor Statistics (Fiore, 2011). And once out of work, they remain unemployed longer than do younger workers—9 months for younger workers, about a year for older workers.

Unemployment Varies by Education and Race/Ethnicity

Older workers who do not have a high school diploma consistently face higher rates of unemployment than do those with diplomas. The rate of unemployment for older work- ers without high school diplomas is 12.4% compared to 5.4% for workers with college degrees (Harootyan & Sarmiento, 2011). In addition, studies show that unemployment rates of Black American and Hispanic older workers are nearly twice those of non-His- panic White older workers (Harootyan & Sarmiento, 2011).

Older Women and Unemployment

According to 2010 U.S. Census Bureau data, women have surpassed men in earning college degrees—from bachelor ’s to advanced degrees. In spite of this, women still earn about one fi fth less than men earn (Roelofs, 2011). Even more discouraging is their unemployment status. With a large proportion of working women employed by govern- mental units as teachers, health care providers, social workers, librarians, and legal aid staff, they have endured disproportional unemployment due to drastic slashes in state and local government budgets, particularly since the midterm elections of 2010 (Pollitt, 2011).

Indeed, one leading writer/commentator/professor—Melissa Harris-Perry (2011)— has claimed that since 2010 the U.S. House of Representatives majority has been clear “that belt-tightening defi cit reduction is entirely compatible with an older social agenda committed to pushing American women out of the public sphere” (p. 12). She goes on to say that some Republican governors elected in 2010 have tried eliminating collective bargaining rights for public-sector employees, such as “nurses, teachers, and other pink- collar workers who are disproportionately women” (Harris-Perry, 2011, p. 12). Some of these rights have been eliminated.

In a study of female job seekers by Texas A&M University, it was determined that “companies were more than 40% more likely to interview a younger job candidate than an

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152 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

older one” (Fiore, 2011, p. 19). And once unemployed, older women workers face signifi - cantly higher wage losses compared to younger women (Van Horn, Corre, & Heidkamp, 2011).

Age Discrimination

Of all the barriers to the employment of older workers, age discrimination is one of the most pernicious and pervasive. Age discrimination in employment fi rst came to national attention in 1965. At that time, a report issued by the U.S. Department of Labor docu- mented that more than 50% of all available job openings were not open to persons aged 55 and older due to employers’ policies (Schulz, 1992). In 1967, Congress enacted the Age Discrimination in Employment Act (ADEA) “to promote employment of older persons based on their ability rather than age; to prohibit arbitrary age discrimination in employ- ment; to help employers and workers fi nd ways of meeting problems arising from the impact of age on employment” (ADEA, 1967).

In its original form, ADEA prohibited employment discrimination against persons aged 40 to 65. Subsequent amendments were made. In 1974, age protection was extended to federal, state, and local government employees. The range of employees covered was also expanded. In 1978, ADEA increased the age covered to 70 (the fi rst step to elimi- nating an upper age limit), and removed the upper age limit for federal government employees. In 1982, ADEA was amended to require employers to retain their workers aged 65 and older on the company health plan rather than automatically shifting them to Medicare. In 1984, ADEA was extended to U.S. companies in foreign countries. The 1986 legislation removed all age limits in protecting older workers, with the exception of college professors and state and local public safety offi cers. The age limit on college professors was lifted in 1994.

The enactment of the Age Discrimination in Employment Act of 1967 and all sub- sequent amendments and accompanying legislation would appear to be enough to solve the problem of age discrimination in employment in the American workplace. Such has not been the case. Although the more obvious and overt forms of age discrimination, such as age limits in newspaper ads and forced retirements at specifi ed ages, have almost disappeared, more subtle and cleverly disguised forms of age discrimination against older workers are still evident.

The 2009 Supreme Court Ruling on Age Discrimination

In June of 2009, the U.S. Supreme Court handed down a 5 to 4 ruling that makes it more diffi cult for older workers who believe they are victims of age discrimination to prove it. The ruling was in response to a suit fi led by a demoted worker under the ADEA. The Court said it is not suffi cient to show that age is among the reasons for the bad treatment of an employee; age has to be the primary reason (Cose, 2009).

It should be noted that very few older workers have the resources to bring a case to court. “Most who do are white, male middle-managers or professionals,” stated Joanna Lahey, an economist with the Rand Corporation (Cose, 2009, p. 26). The larger issue here is how society tends to view categories of people, such as older workers; how stereotypes are imposed on older-aged workers. To address this, laws are very important, but so is a new paradigm of aging in America—where workers are viewed according to their value, not their age.

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10. ECONOMICS OF AGING: WORK AND OLDER PERSONS 153

Health and Older Workers

With all the forces motivating older people to continue to work in paid employment or seek to fi nd work if not employed, the question is raised if they are healthy enough to work. Health directly impacts an individual’s ability to work in old age. According to a study conducted by the Center for Retirement Research at Boston College, “life expectancy has been steadily increasing, but differences in health and mortality (death) outcomes have widened and improvement in health for the population in general may have slowed or reversed” (Munnell, Soto, & Golub-Sass, 2008, p. 1). Between 1970 and 2000, while life expectancy at age 50 increased by 4.2 years, disability-free life expectancy increased by only 2.7 years for men (Munnell et al., 2008). The improvement that was noted in people with more education. However, these overall averages do not tell the real story because health status as well as disability-free life expectancy vary dramatically by socioeconomic status, occupation, and income. How disability-free life expectancy will change in the future depends on the general health of the population, as well as increas- ing educational achievements (Munnell et al., 2008).

SUGGESTED RESOURCES

Bureau of Labor Statistics (BLS): http://www.bls.gov The Bureau of Labor Statistics of the U.S. Department of Labor is the principal federal agency

responsible for measuring labor market activity and working conditions. Data available on this website include unemployment, employment, pay and benefi ts, and workplace injuries.

Social Security Trust Funds: http://www.socialsecurity.gov/OACT/TR/index.html Through this part of the U.S. Social Security Administration’s website, annual reports on the

fi nancial status of the Trust Funds are available, including projections of future revenue and expenditures.

Supplemental Security Income (SSI): http://www.ssa.gov/pgm/ssi.htm Provided by the U.S. Social Security Administration, this website provides information on

the SSI program, including how to apply for it and other resources available for current SSI recipients.

U.S. Department of Labor: http://www.dol.gov This federal government website has links and referrals to resources on age discrimination,

adult training programs, and job searches. Workforce50.com: http://www.workforce50.com Workforce50.com arms the older workforce with employment resources and career informa-

tion to achieve their goals. It is committed to helping mature job seekers fi nd meaningful employment opportunities.

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http://www.bls.gov

http://www.socialsecurity.gov/OACT/TR/index.html

http://www.ssa.gov/pgm/ssi.htm

http://www.dol.gov

http://www.workforce50.com

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155

CHAPTER 11

Retirement: A Changing American Institution

The learning objectives of this chapter include understanding

The history of retirement and the reasons people retire. ■ Current trends to delay retirement. ■ Major shifts in the types of pensions and how they impact a person’s ability to retire. ■ The future directions of retirement. ■ The effects of retirement on marriages, incomes, and psychological well-being. ■

THE CHANGING NATURE OF RETIREMENT

In a new paradigm of aging, retirement as an institution is in a state of change. Up until around the beginning of the 21st century, thanks primarily to the expansion of Social Security and the broad coverage of Medicare (income and health entitlements), it was generally believed that most Americans would enjoy—and look forward to—years of retirement. Books and articles that were written about older people toward the end of the 20th century assumed that most workers would spend years in retirement (Riekse & Holstege, 1996). But economic realities, social trends, lifestyles, and societal norms tend to change over time and retirement as an American institution has not been exempt from change.

Even before a variety of factors impacted the institution of retirement in the 21st century, retirement had many meanings as pointed out by Abraham Monk (1994), some years ago:

It refers to the termination of and formal withdrawal from a regular job under the provisions of a statutory pension system, a demographic category, an economic con- dition, a social status, a developmental phase in the human life span, the transition

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156 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

to old age, and a lifestyle dominated by leisure pursuits or at least by economically nonproductive activity. (p. 3)

In the 21st century, however, not all Americans take for granted that a good portion of their lives will be spent in retirement, even though retirement has become an established institution. Indeed, it was just a few years ago that retirement could occupy up to one third of a person’s life. How and why this has changed will be explored later in this chapter. But fi rst, it is important to look at how retirement became a prime feature of a working person’s life, and examine how this history contributes to a new paradigm of retirement for middle- and younger-aged workers.

HISTORICAL PERSPECTIVE ON RETIREMENT

Retirement is not something that has always been part of the American scene. In 1900, when the life expectancy for men was 46.3 years, the average man spent only 1.2 years in retirement or in activities out of the labor force. This was only 3% of a man’s life. By con- trast, in 1900, women spent an average of 29 years working at home and in retirement out of an average life expectancy of 48.3 years, and averaged only 6.3 years in the labor force (U.S. House of Representatives, Select Committee on Aging, 1992). Societal roles typically mandated that a woman’s work be confi ned to the home setting.

With dramatically longer lives, the passage of the Social Security Act of 1935, the advent of Medicare in 1965 (health insurance for persons aged 65 and older), and addi- tional coverage of pensions in the private and public sectors, retirement became a reality for millions of Americans. At one point, early retirement entered the picture as a goal for many workers. By 1990, only 16% of men over the age of 65 were in the labor force. Decreased participation rates in the labor force applied to younger categories of workers as well, especially those aged 55 and older. Indeed, only about 2 in 5 (39.3%) men aged 55 and older were paid workers in 1990. On the other hand, women in their late 50s were more likely to be in the labor force in 1990 than in previous decades (Taeuber, 1993). Since that time, the percentage of both men and women in the labor force has increased, as will be described later in this chapter.

Why Retirement?

One way to understand retirement is to examine its historical trends. Another way to grasp the retirement concept is to understand why the goal of retiring has been so wide- spread. Schulz and Binstock (2006) explore the retirement concept in their book, Aging Nation. Why, they ask, is most of our workers’ increased leisure bunched at the end of the life cycle? They explain this reality by quoting one of the early pioneers of gerontology, Clark Tibbits, who stated, “Retirement is a phenomenon of modern industrial society . . . . The older people of previous societies were not retired persons; there was no retirement role” (Schulz & Binstock, 2006, p. 145). When society became based on an industrialized economy, Schulz and Binstock point out that it was in the self-interest of employers to require long hours when workers were young and get rid of them when they became old. Another scholar, Juliet Schor, contends that the “key incentive structures of capitalist (market) economies contain biases toward long working hours . . . . The eventual recov- ery of leisure came about because trade unions and social reformers waged a protracted struggle for shorter hours” (Schulz & Binstock, 2006, p. 144).

But Schulz and Binstock point out that not all workers were treated the same. Instead of longer hours for older workers, employers promoted “retirement”—a way

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11. RETIREMENT: A CHANGING AMERICAN INSTITUTION 157

to get rid of those they thought were defi cient workers. As a result, by 1900, long before public and private pensions were widely established, almost one third of workers 65 and older were “retired” due to poor health. But how could these workers afford retirement in the beginning of the 20th century? The reality was that too many of them could not. They had to rely on their own savings (which were typically small), support from relatives, or charity, which could be life on a county poor farm. As a result, there was a push for some types of retirement incomes, which led to the establishment of the Social Security system in 1935 and the growth of private pensions in the 1940s and beyond. (For more informa- tion about the history of Social Security, see Chapter 10.) In addition, Schulz and Binstock point out that industrial growth—spurred by new technologies—resulted in economic output and growth that increased living standards and options for greater leisure, includ- ing retirement.

A New Paradigm in Retirement

In his book, The Longevity Revolution (2008), the late Robert Butler, a renowned geria- trician, pointed out that in a new paradigm of aging in the 21st century, “it is time to overcome the factors that encourage early retirement, introduce shared work and more fl extime and phased retirement, advance the age of eligibility for Social Security, and secure more effectively the employment and rights of older persons and the disabled” (p. 255). He went on to point out that being productive in the older ages will help to address the three greatest fears of a society in which people live longer—the fear that there will be too many dependent older people, the fear that older people will hinder economic pro- ductivity, and the fear that there will be more intergenerational confl ict in the future.

Full (Normal), Early, and Late Retirement

In 1983, amendments to the Social Security Act introduced a gradual increase in “full retirement age” or “normal retirement age” from 65 years of age to a maximum of 67 years based on a benefi ciary’s year of birth (see Table 11.1). The purpose of raising the

TABLE 11.1 Age to Receive Full Social Security Benefi ts, by Year of Birth

YEAR OF BIRTH FULL RETIREMENT AGE

1937 or earlier 65

1938 65 and 2 months

1939 65 and 4 months

1940 65 and 6 months

1941 65 and 8 months

1942 65 and 10 months

1943–1954 66

1955 66 and 2 months

1956 66 and 4 months

1957 66 and 6 months

1958 66 and 8 months

1959 66 and 10 months

1960 or later 67

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158 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

age at full retirement was to extend the solvency of Social Security funds, given the fact that people are living longer than they were when Social Security was enacted, while at the same time recognizing that improvements in health are making it more feasible for people to remain in the labor force for longer periods of time

All those eligible for Social Security benefi ts can choose to retire as early as age 62, with a concomitant reduction in monthly benefi ts to offset the longer time period over which they will receive benefi ts. In addition, individuals can choose to begin receiving benefi ts later, at any time after their full retirement age up to age 70, with a concomitant increase in monthly benefi ts to compensate for the shorter time period over which they will receive benefi ts. The Social Security website (http://www.ssa.gov) provides current and future retirees with tools for calculating their projected benefi ts under these scenar- ios. Regardless of the age at which an individual opts to begin receiving Social Security benefi ts, the age for signing up for Medicare remains 65; waiting longer may result in higher costs for Medicare Part B and Part D.

THE RISE OF RETIREMENT COMMUNITIES

The big question in retirement (including early retirement) becomes “what should we do for the rest of our lives?” At the 1961 White House Conference on Aging, President John F. Kennedy spoke about how impressive it was that so many years had been added to persons’ lives. But he said it was now important to “add new life to those years” (Lohr, 2005). Just a year earlier in 1960, Del Webb had opened his fi rst retirement community, Sun City, near Phoenix, Arizona, as a destination to live out these retire- ment years. As the New York Times writer, Steve Lohr (2005), observed, Sun City tapped into a new vision of retirement where people could leave work and their old neighbor- hoods and move to a retirement community designed for endless vacationing for the rest of their lives—or at least until they became too frail or ill and needed the support of families. These years were termed the “golden years,” which were affordable for many Americans born between 1900 and 1945. These retirement communities sprang up primarily throughout the sunshine states in the Southern and Southwestern areas of the United States with major concentrations in Florida, Arizona, and California. There is a question of whether these golden years’ dreams (for many) could have been sustained over a longer time frame. But the reality is that for a number of reasons, what once seemed to be a realistic future for many American workers appears to be disappearing.

REASONS TO DELAY RETIREMENT

One reason some of these “golden years” dreams are changing is because many Baby Boomers are rejecting the concept of retirement as an endless vacation. Research has consistently shown that most Boomers do not see themselves giving up work after what has been a traditional retirement age. In fact, about 80% of them plan to engage in some kind of paid work into their 70s, and even beyond (Fleck, 2008; Lohr, 2005). And this trend is not confi ned to the United States. In one of HSBC’s early global studies on retirement, 21,000 employees and 6,000 employers in 20 countries were surveyed. One quarter of the respondents said that the main reason they would con- tinue to work past normal retirement age would be to earn money (HSBC, 2006). Others said doing something meaningful, keeping physically active, interacting with others, and promoting mental stimulation were their main reasons for working in retirement.C

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11. RETIREMENT: A CHANGING AMERICAN INSTITUTION 159

The Great Recession of 2008 to 2009

Another reason to delay retirement has been the Great Recession of 2008 to 2009. For example, in a survey conducted by the AARP early in the recession, about 1 in 5 persons aged 55 to 64, and nearly 1 in 4 persons aged 45 to 54, planned to delay retirement because of the economic downturn, which included falling home values and decreased personal fi nancial worth of savings in investments (40% to 50% decrease). By 2014, it is estimated that the number of workers aged 65 and older in the labor pool will increase by 74% (Fleck, 2008).

Decreased Mobility

Still another reason retirement concepts and realities are changing relates to the decreased mobility of the American people. For a period of time in the late 20th century and the very fi rst part of the 21st, America was thought of as a nation on the move—people moving from one place to another, from one region to another, and especially for older people, from cold areas to the Sun Belt, even though the percentages of older people that actu- ally did move were rather low. For more than a generation, it was commonly thought that mobility would increase, with a resulting trend toward rootlessness. This idea was explained in a book by Vance Packard in 1972 entitled, A Nation of Strangers, and in Robert Putnam’s book, Bowling Alone, in 2000. Putnam’s view was that society was being undermined by suburbanization and increasing mobility. This mobility was particularly promoted by some of the large corporations such as IBM, whose initials were jokingly referred to as “I’ve Been Moved.”

Scholars have noted a new trend that will likely impact retirement trends for some years. This trend is called the “new localism,” which has the following premise: “The longer people stay in their homes and communities, the more they identify with those places and the greater commitment to helping local businesses and institutions thrive” (Kotkin, 2009, p. 42). Numerous factors are contributing to this concept including “(1) an aging population; (2) suburbanization; (3) the Internet; and (4) increased focus on family life” (Kotkin, 2009, p. 42).

By 2006, fewer people were moving around the nation than at any time since 1940 when the census started keeping track of population mobility. Most importantly for aging in the 21st century, it appears that the stay-at-home trend is especially strong among older Baby Boomers who are largely turning their backs on Sunbelt retirement in faraway condos and mobile homes. They want to stay in their own homes in their old regions. They are choosing to keep active with their families, friends, clubs, and churches in famil- iar surroundings (Kotkin, 2009). As an example, in Michigan, thousands of retired school personnel (teachers, administrators, etc.) could migrate to any region of the nation upon retirement, due to income security, being relatively young (many retiring in their mid-50s after 30 years of service), and generally being in good health. However, 87% still live in Michigan with 4% in Florida, 1% in Arizona, and lesser percentages elsewhere (“Where Do ORS Retirees Live?,” 2009).

Rejecting a Permanent Vacation

Ken Dychtwald, a gerontologist and consultant on aging, said, “A life of leisure for most people is boring. Retired Americans watch an average of 43 hours of TV a week, akin to a full-time job. Traditional retirement has proved to be a failed experiment” (Lohr, 2005). This all contributes to the idea of changing the nature of retirement in the 21st cen- tury. Marc Freedman, a leader in Civic Ventures (an advocacy group that promotes older C op yr ig ht @ 2 01 4. S pr in ge r Pu bl is hi ng C om pa ny .

160 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

people as volunteers and paid workers) has said that just as the golden years concept was about freedom from work, the new concept of retirement could be about freedom to work in ways that are rewarding to older persons (Lohr, 2005).

BABY BOOMERS AND RETIREMENT

Between 1946 and 1964, about 75 million Baby Boomers were born in the United States. An additional 7.8 million born in other countries during these years have immigrated to the United States (U.S. Census Bureau, 1996). The fi rst of the Baby Boomers turned 66 in 2012, making them eligible for Social Security’s early retirement benefi ts. By 2020, the number of persons aged 60 to 64 is projected to nearly double from the 2000 census number.

Most Baby Boomers have expected that they will still be working during their retire- ment years—some because they enjoy the social contacts at work as well as the work itself, and others because they believe they will need the income. Baby Boomers do not want to depend on their children in retirement. But there has been speculation about how prepared the oldest Baby Boomers are for retirement.

Some negative factors increase the risks in retirement for many of the oldest Baby Boomers. The shift to more defi ned-contribution pension plans and away from defi ned- benefi t pension plans, as outlined in Chapter 10, poses a real risk to retirement security. Defi ned-contribution plans depend on the value of 401(k) retirement accounts, and work- ers experienced large losses in their accounts during the Great Recession, thereby jeopar- dizing their future retirement.

FACTORS IN DECIDING TO RETIRE

In a new paradigm of aging, deciding if and when to retire is not determined solely by reaching a certain birthday in life’s journey. The decision to retire involves a complex set of conditions and circumstances in each individual’s life. Some of the experts in the area of retirement have looked at the key factors a person needs to consider regarding retire- ment. Among all the factors that are important in deciding whether and when to retire, the most important are a person’s fi nancial status and the condition of his or her health (Clark, Morrill, & Allen, 2012).

The Great Recession and Financial Security

Financial security has continued to be a key element in considering retirement, particu- larly since the Great Recession of 2008 to 2009. For example, in February 2009, the stock market, where so many workers have invested retirement funds such as 401(k)s, was down 45% from its October 2007 high, a $7 trillion loss in value of which $5 trillion was lost by persons aged 50 and older (Toedtman, 2009). In addition, housing values were down 20%, with most of the losses coming from persons aged 50 and older. And in that recession, 5 million jobs were lost, with unemployment doubling for workers aged 55 and older (Toedtman, 2009).

As a result, according to a survey by the Employee Benefi t Research Institute, the percentage of workers “very confi dent” of a fi nancially secure retirement dropped from 41% in 2007 to 13% in 2009. For many, working longer is no longer a choice but a neces- sity in times of economic downturns (Toedtman, 2009, p. 3). Turmoil in the equity mar- kets, rising infl ation, rising health care costs, and increased taxes all impact retirement planning.C

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11. RETIREMENT: A CHANGING AMERICAN INSTITUTION 161

Health Status

For a long time, it has been recognized that an individual’s health infl uences their retire- ment decisions in various ways. Poor health can limit a worker’s ability to carry out certain tasks. It may become diffi cult for a worker in declining health to keep up with the workload of a given work situation. In addition, a person’s poor health may make work in general more diffi cult, resulting in a marked reduction in wanting to work. Going through the effort of getting to work and being there all day can simply become too dif- fi cult for some.

Health status can also directly impact a person’s fi nancial status when consider- ing retirement. A study for AARP, using data developed some months before the stock market meltdown, found that persons aged 55 and older were the fastest-growing group to declare bankruptcy in 2007—almost 1 in every 4 cases. And these rates of bankruptcy increased with age (Kirchheimer, 2009). Elizabeth Warren, who headed the special con- gressional panel monitoring the bank bailout funds of the federal government prior to her election to the U.S. Senate, noted that “medical problems were a big reason [for the bankruptcies]” (Kirchheimer, 2009, p. 14).

PLANNING FOR RETIREMENT

One of the most important things people of all ages can do to have positive experiences in retirement is to prepare for it by planning ahead. Not until the years following World War II was there any organized effort to help people plan for their retirements. In 1948, Clark Tibbitts and Wilma Donahue of the University of Michigan, along with Ernest Burgess

of the University of Chicago, began develop- ing preretirement educa- tional programs (Cooper, 1994). In 1956, Woodrow Hunter of the University of Michigan offered the fi rst preretirement pro- gram that was sponsored by a union (Hunter, 1968). Since that time, planning for retirement has become

an integral part of a successful transition to another part of the life cycle. Older adults and professionals talk about planning for retirement in Video 12.

Working Longer for More Income

According to an analysis by for The Retirement Project, an initiative of the Urban Institute, “when people work longer, they produce additional goods and services for the econ- omy . . . earn more income, usually save some of that income, allow their assets to grow, and increase their annual Social Security benefi t” (Butrica, Smith, & Steuerle, 2006, p. 2). These economic advantages are even higher for lower- and middle-income Americans than they are for high-income Americans.

In addition, the analysis revealed that long-term differences between the benefi ts Social Security pays and the revenues it takes in would be cut dramatically if people con- tinued working just one more year. Consequently, the need for other possible remedies to Social Security’s projected shortfall, such as increasing Social Security taxes or decreasing

Episode 12: Retirement—Having a Plan

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http://raidercast.grcc.edu/flash/2011_2012/grcctv/successful_

aging/success_aging_12_large/grcc_player.html

Low Bandwidth:

http://raidercast.grcc.edu/flash/2011_2012/grcctv/successful_

aging/success_aging_12_small/grcc_player.html

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162 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

benefi ts, would be reduced. Chapter 10 goes into detail about the history, current status, and long-term future of Social Security. The bottom line is that “added work leads to a more solvent and more fi nancially secure retirement” (Butrica et al., 2006, p. 6).

MARRIAGE AND RETIREMENT

Research has shown that when both spouses are employed, married couples prefer to retire at approximately the same time so they can spend time with each other after retir- ing. However, the availability of Social Security benefi ts does affect couples’ decisions about the timing of retirement (Gustman & Steinmeier, 2002). This pattern of retirement planning differs when one spouse is forced to retire because of a health problem or job loss; if a spouse has a long-term health problem, the other spouse is less likely to retire.

Marital Relationships and Retirement

Marriage and retirement can be a tricky combination. Although retirement can be a crisis point for marriages because there is a big adjustment for the two spouses spending so much time together, the retirement years can also be among the most rewarding years of a marriage, right up there with the newlywed years. The most stressful years are generally regarded as the child-rearing years.

However, the retirement of a spouse can have a major impact on a marriage. Two humorous quips partly describe what can result when a spouse retires: “For better or for worse, but not for lunch,” and “Retirement is twice as much husband and half as much money” (Trafford, 2005). Postretirement diffi culties can take different forms. A retiring husband may be at greater risk of getting ill than his wife is. Depression is a risk for a retiring spouse, particularly if the retiree does not have other interests or a network of friends outside of work.

Retired Spouse Syndrome

Retirement strains are not limited to men. As more and more wives enter the workforce, potential strains also apply to female workers who retire. Some balance between being independent and being together seems to work for many American couples. But these postretirement marital strains are not limited to the United States. So many Japanese couples reported physical ills to their doctors after the husband retired that this pat- tern of stresses was given a name—“retired husband syndrome.” When applied to both husbands and wives, this stress pattern is called “retired spouse syndrome” (Trafford, 2005).

How widespread is the “retired spouse” syndrome in the United States? To fi nd the answer to this question, AARP commissioned a survey of retired married (or living-as- married) couples aged 55 through 75. Unlike retirees in Japan, a big majority (71%) said they really did not mind having their spouses around them more (Koppen & Anderson, 2008). In fact, 96% said their relationship was as strong as, or stronger than, when they were working; 89% stated they were at least as romantic; and 84% said they spent more time doing things together. Overall, 78% said they were happier than when they and their spouse were still working. Perhaps some explanations for this perceived happiness include the fact that 80% of the retired men said that they increased their share of the housework (although only 47% of women said their spouses have done so), and 7% of the retired couples engaged in more sexual activities than they did when they were working (Koppen & Anderson, 2008).

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11. RETIREMENT: A CHANGING AMERICAN INSTITUTION 163

WOMEN AND RETIREMENT

As in many fi nancial areas of life, over the past decades women have been at a particular disadvantage regarding retirement. Going back many years, a study by the University of Miami’s Center on Adult Development and Aging, found that under our economic system, men typically are able to retire earlier and with fewer cares than women have. According to one of the authors of the study, “Working women don’t retire, or plan to retire, as early as men do unless they are married and their husbands have a good income or a lot of money stashed away” (Taft, 1991, p. 3E). The historical difference between the number of men and women seeking early retirement exists partly because women usu- ally enter the labor force later than men do and, as a result, have fewer credits in Social Security or private pension plans.

Divorce and Retirement

According to the same study, divorced and separated women are particularly disadvan- taged regarding early retirement. Divorced women need to plan to spend three more years being employed than do married women. Separated women need to plan to spend two more years in the labor force. On the other hand, divorce and separation have no negative effect on men’s decisions for early retirement. This study reinforces others that clearly indicate that a woman usually comes out of a divorce or separation fi nancially worse off than men do.

Vulnerable Financial Status of Women

Not too much has changed for women in the fi rst decades of the 21st century. Two AARP studies, Understanding Women’s Financial Needs & Behaviors and Developing a Savings Habit, have found that even though women had come a long way when it comes to their fi nan- cial affairs, they still have a harder time making ends meet than men do, which directly impacts their retirement prospects (Reyes, 2007). These studies concluded that the fi nan- cially disparity between women and men is primarily due to social issues that result in too many women earning less money than men do, women tending to drop in and out of the workforce because of their roles as caregivers (for the young and the old), and women constituting many single-heads of households (37 million in 2012, according to the U.S. Census Bureau, 2012), who are trying to survive in what has become for many a two-earner economy (Reyes, 2007).

As a result, almost a quarter of adult women say they struggle fi nancially, with almost 40% reporting that they are just barely getting by. Xenia Montenegro, principle researcher for the fi rst AARP study, stated, “The sad fact is, 96 percent of American women have problems to some degree with having enough money” (Reyes, 2007, p. 80). Jean Koppen, principle researcher for the second study, stated, “For low-income working women it’s even more tenuous. They can limp along fi nancially for years. But all it takes is one mishap to topple their fi nancial house of cards: a divorce, a job loss or a major ill- ness. Then they can spend the rest of their lives just catching up” (Reyes, 2007, p. 80).

A New Financial Future for Women?

It seems that all is not doom and gloom for many women in a new paradigm of aging in the 21st century. According to Rana Foroohar and Susan Greenberg (2009), econo- mists, consultants, and other business types have looked at the rise of a new emerging

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164 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

market—women. A study by The Boston Consulting Group indicated that women may be in a position to drive the economy following the Great Recession of 2008 to 2009. The reasoning for this view includes (a) the prediction that the vast majority of new income growth in the years to come will go to women as a result of closing the wage gap (the dif- ference between what men and women earn); (b) large improvements in women’s edu- cation, documented by the fact that currently a majority of college students are women; (c) large increases in labor-force participation rates by women—including women in developing countries; and (d) dramatic improvements in health along with lower fertil- ity rates. All of these factors can directly impact the prospects of retirement for women in the United States and around the world.

THREATS TO RETIREMENT SECURITY

For years, experts have warned about numerous possible threats to retirement including retiring too early, turmoil in the investment markets, increasing debt for older Americans, underfunded pension plans, and threats to the Pension Benefi t Guaranty Corporation.

Retiring Too Early and Infl ation

In a column on early retirement many years ago, Jane Bryant Quinn (1992) wrote a memo to workers who retired early or were planning to:

You probably won’t make it fi nancially unless you fi nd a part-time job. At 55 you could easily live another 30 or 40 years. If you’re not working, you’ll need more sav- ings than most people ever see in a lifetime. (p. 13)

Quinn went on to point out that the early retiree’s silent enemy is long-term infl ation. If a retiree was living on $30,000 in 1992, by the year 2017, 25 years after retirement, the retiree might need $80,000 a year to pay for the same things. About one fourth of that amount might come from Social Security, which includes a cost of living adjustment, but pensions generally do not increase with infl ation. The rest would have to come from savings or work, but it is usually diffi cult for most people to work 20 to 30 years after retirement.

Investment Market Turmoil

Because so much of the savings by current and future retirees is invested in the equity markets (stocks and bonds) due to 401(k) retirement plans, turmoil in these markets can be a major threat to fi nancial security in retirement. This was pointed out early in the Great Recession when it was observed that older Americans with stock market investments were among the hardest hit by the big drops in the equity markets. In September 2008, just as the markets were falling, Alicia Munnell, Director of the Center for Retirement Research at Boston College, stated, “There’s a terrifi ed older population out there. If you’re 45 and the market goes down, it bothers you, but it comes back. But if you’re retired or about to retire, you might have to sell your assets before you have a chance to recover” (“Market Turmoil Slaps Retirees,” 2008, p. A1). She went on to point out that today’s retirees have less money in savings, expect to live longer, and are more vulnerable to the risks of the equity markets than are any retirees since World War II. The Benefi t Research Institute of Washington found that even before the market fell in September 2008, some 39% of retirees thought they would outlive their savings, which was a 10% increase from the

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11. RETIREMENT: A CHANGING AMERICAN INSTITUTION 165

previous year (“Market Turmoil Slaps Retirees,” 2008). By October 2008, the stock mar- ket’s fall had wiped out almost $4 trillion of individuals’ retirement funds, losses that were evenly divided between defi ned-benefi t and defi ned-contribution plans (Munnell & Muldoon, 2008). “But in the future,” Munnell and Muldoon (2008) cautioned, “indi- viduals will bear the full brunt of market turmoil as the shift to 401(k)s [associated with defi ned-contribution plans] continues” (p. 1).

Increasing Debt for Older Americans

Even before the Great Recession, it was observed that older Americans and some of the Baby Boomers were piling up debts that could negatively impact their retirements or planned retirements. During the real estate boom, and prior to the Great Recession, substantial numbers of middle- and older-aged people borrowed against the value of their homes. For example, in 2006, Federal Reserve data indicated that while the value of household real estate climbed 71% in the prior 5 years, mortgage debt grew 75% as many persons cashed out part of the equity in their homes (Clements, 2006). During this same time period, outstanding consumer debt (including car loans and credit card debit) increased by 27%. The reasons for debts among older people include: (a) increasing life expectancy, which translates into longer years of life to fi nance; (b) health care costs that have continued to escalate, even for persons on Medicare; and (c) interest rates on sav- ings that have turned lower, which means a lower monetary return on which to live (Clements, 2006).

Underfunded Pension Plans

Another threat to the fi nancial stability of current retirees is the unsoundness of the pen- sion plans under which many retire. To protect pensions and the retirees who depend on them, the Employee Retirement Income Security Act (ERISA) became law in 1974. ERISA was designed to expand the supervision and regulation of private pension plans by the federal government and to create tax-exempt individual retirement accounts for persons not covered by a qualifi ed pension plan. Also established under ERISA was the Pension Benefi t Guaranty Corporation (PBGC), part of the Department of Labor. This agency is designed to guarantee pension payments to retired workers and future payments to vested workers (workers who have worked long enough to collect under a pension plan) when a defi ned-benefi ts pension plan is terminated or runs out of money, which occurs frequently in turbulent economic times. In 2012, PBGC paid retirement benefi ts of up to $57,477 per year to 887,000 retirees whose employers (more than 4,500 of them) could not pay the benefi ts they had promised their employees (Pension Benefi t Guaranty Corporation, n.d.).

Threats to the Pension Benefi t Guaranty Corporation (PBGC)

The recent Great Recession was tough on the Pension Benefi t Guaranty Corporation. In 2012, its total liabilities ($112 billion) exceeded its assets ($83 billion).

Because PBGC’s obligations are paid out over the lives of people receiving pen- sions, a defi cit means we will have less money than we will need, over a period of decades. Without changes, at some point there is a risk that a program in a defi cit position will run out of money. It will have paid out all its assets and still owe ben- efi ts. (Pension Benefi t Guaranty Corporation, 2012, p. 4)

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166 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

It should be noted that the PBGC receives no tax money. Its revenues come from insur- ance premiums paid by employers who offer defi ned-benefi t pension plans ($35 annually per employee in 2012 for single-employer plans), earnings from its investments, assets from employers’ failed pension plans, and funds recovered from these employers’ bank- ruptcies. With the uncertainty of these revenues, as well as the potential for more bank- ruptcies in the fragile economy, the future of the PBGC is diffi cult to determine.

RETIREMENT TRENDS

The historic decline in people working into their older ages began around 1880 and con- tinued until about the mid-1980s. Since then, the trend toward early retirement has ended, and in some respects, has reversed (Munnell, 2011). Over the course of the previous four decades or so, a number of policy, economic, and other factors have contributed to work- ers remaining in the workforce for longer periods of times.

Changes to Social Security and Private Pension Plans

Changes to Social Security in the year 2000 allowed individuals of full retirement age to continue working and collect full Social Security benefi ts, regardless of their earnings. Prior to that year, individuals under age 69 who continued working had their monthly benefi t reduced by 1 dollar for every 2 dollars they earned, so many workers chose to leave the workforce. (Note that the amount lost in these reductions was restored when the person attained full retirement age.) In addition, workers now receive higher benefi ts if they wait until age 70 to claim them.

The dramatic shift by many employers to defi ned-contribution plans since the 1980s has contributed to the trend to stay in the workplace longer—workers with these plans retire on average 2 years later than do workers with defi ned-benefi t plans (Friedberg & Webb, 2005). In Chapter 10, these pension plans and their advantages and disadvantages are described in more detail.

Declining Health Insurance Benefi ts

As health care costs have increased, many employers have decreased their support for health insurance, and some have completely dropped this benefi t for retirees (Monk & Munnell, 2009). For those workers who might decide to retire but are too young to qualify for Medicare, eliminating retiree health insurance is a disincentive to retire. According to an analysis by the Center for Retirement Research at Boston College, approximately 7% of workers aged 55 to 64 would delay retirement if their employer stopped offering health insurance for retirees; in 2009 that would have amounted to over 1 million people remain- ing in the workforce (Monk & Munnell, 2009). This may be one of the main reasons why more workers have been delaying retirement until age 65 in the last few years—they are waiting until they are covered by Medicare.

Workplace Changes and Other Factors

There is some evidence that the workplace has become friendlier to older workers, but much progress is still needed to accommodate them (Centers for Disease Control and Prevention [CDC], 2012). In one inexpensive pilot program, the BMW car company modifi ed the work environment for their older workers, for example, “replacing cement fl oors with wooden platforms to reduce the impact on knees [and providing] adjustable Co py ri gh t @ 20 14 . Sp ri ng er P ub li sh in g Co mp an y.

11. RETIREMENT: A CHANGING AMERICAN INSTITUTION 167

worktables to reduce physical strain and facilitate personnel rotation during shifts” (CDC, 2012, p. 5). These and other changes that were instituted after discussions with the company’s employees resulted in a rise in productivity and a decrease in absenteeism, demonstrating the value of such programs not only for employees but also for employ- ers. The opportunity for fl exible schedules; for “bridge” jobs, which are transitional from full-time work to retirement; and for health education and physical activity programs are among numerous other ways to create more age-friendly workplaces.

In addition to changes in employment policies and practices, increases in workers’ years of education, improvements in health, and couples coordinating retirement are all associated with working for extra years beyond normal retirement age (Munnell, 2011).

PSYCHOLOGICAL IMPACTS OF RETIREMENT

The major focus of this chapter has been on the fi nancial implications of retirement. After all, fi nancial security, or at least a perception of fi nancial security, is what has made retire- ment possible. However, as noted earlier in this chapter, retirement is more than a fi nan- cial consideration. It is a major life event, especially for people whose identities are tied to their life’s work. In the past, this has been particularly true for men, whose lives have been mostly identifi ed by the jobs they held, the professions they have had, or the work they have done. Increasingly, this type of personal job identity is true for women too as more and more are in the paid labor force for longer periods of their lives.

Leisure Opportunities

Opportunities for retirees’ leisure are many, including returning to school, working part- time or temporarily, consulting, teaching, starting a business at home, becoming involved in the creative arts, traveling, and volunteering. The U.S. Bureau of Labor Statistics (2012) reports that 24% of persons aged 65 and older participate in volunteer activities. Some retirees volunteer to keep busy or out of a sense of duty. Most participate in volunteer activities because doing so gives them a sense of satisfaction.

The possibilities for volunteering among older people are endless. Matching talents and interests to needs is the key. Need exists everywhere in society, just waiting to be addressed by people with the time, interest, and ability. Chapter 13 presents information on the volunteer opportunities available to older adults through Senior Corps, a program of the Corporation for National and Community Service.

The Practical Application at the end of Part III of this textbook provides additional information on the changing paradigms of work and retirement, as well as the impor- tance of helping older persons to rediscover their life purpose in retirement.

SUGGESTED RESOURCES

Center for Retirement Research at Boston College: http://crr.bc.edu The Center is a national leader in retirement research, including economics and behavior

related to older workers, pensions, and health. The site provides access to research reports; the National Retirement Risk Index, which measures how prepared people are for retirement; and interactive tools to help people of all ages plan for retirement.

CNNMoney, Retirement: http://www.money.cnn.com/retirement This website, a service of CNN, Fortune, and Money magazines, has an “ultimate guide to

retirement,” which focuses on ensuring fi nancial well-being in retirement. The site also offers a variety of topical news related to retirement.Co

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http://crr.bc.edu

http://www.money.cnn.com/retirement

168 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

Social Security Administration: http://www.ssa.gov The offi cial website for Social Security offers information on all programs related to Social

Security, including retirement benefi ts, disability and survivors’ benefi ts, Supplemental Security Income (SSI), and Medicare.

What You Should Know About Your Retirement Plan: http://www.dol.gov/ebsa/publications/ wyskapr.html

This website from the U.S. Department of Labor includes information on types of retirement plans, payment of benefi ts, what happens to benefi ts during a plan termination or company merger, and what to do if there are problems.

Women’s Institute For A Secure Retirement (WISER): http://www.wiserwomen.org Founded in 1996, WISER is a nonprofi t organization that focuses on improving the long-term

fi nancial quality of life for women. It supports research, conducts workshops, and creates consumer publications on issues relating to women’s retirement income, including Social Security, divorce, pay equity, pensions, savings and investments, home-ownership, and long- term care and disability insurance.

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http://www.ssa.gov

http://www.dol.gov/ebsa/publications/wyskapr.html

http://www.wiserwomen.org

http://www.dol.gov/ebsa/publications/wyskapr.html

169

Practical Application III

The Diverse Living Conditions of Older People

INTRODUCTION

The four chapters in this section present detailed information on the living environments and housing options of older people, as well as the economics of aging including the impact of work and retirement on the lives of older persons. This practical application explores the realities of aging in place, and examines the changing meaning of work and retirement with a particular focus on helping older persons rediscover their life purposes.

Aging in Place

In the immortal words of Dorothy from the Wizard of Oz, “There is no place like home”; at least this is the opinion of the majority of older persons who wish to age in place. To this end, the role of the gerontologist should be to provide the support necessary to help those that they serve to remain safely within their home (however, they may defi ne it) in the community. Is this always possible? Does everyone defi ne home in the same way? What constitutes safety within the home? How does mental competency play into an older person’s ability to remain in his or her own home and age in place? I would like to now address each of these questions.

Is it possible for everyone to age in place within his or her own home? Absolutely not. I think the best way to look at this is that there are no absolutes. Each person’s situ- ation is unique and needs to be examined on an individual basis. Over the years, I have heard from many family caregivers that their parent made them promise to never place them in a nursing home. It is my professional opinion that this promise should never be made. Why? Each individual’s situation is different, and in many cases, a nursing home or some other type of long-term care placement might be in the best interest of the individual. It is possible that this level of care is what would be most benefi cial to the

Michael A. Faber

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170 III. THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE

individual based on their care needs, need for social stimulation, fi nances, and/or avail- ability of qualifi ed and capable family caregivers. It is important to keep in mind that not everyone has the right personality, patience, and/or ability to provide care for an older loved one.

The concept of home is different for different people. It may be a house, apartment, condominium, trailer, or even a joint living arrangement with a friend, family member, or signifi cant other. No matter where someone chooses to live, home is usually the one place where an individual feels most comfortable and in control of their own life. Therefore, it is no surprise that most individuals wish to age in place within their home and would resist any change that would take them away from that “home.”

The issue regarding what is safe and when it is no longer appropriate for someone to remain in his or her home is a complex issue with no easy answer. The professional or family member contemplating this issue needs to take a number of factors into consider- ation, including but not limited to, the following:

Is there evidence of memory loss or other mental factors resulting in an indi- ■ vidual’s vulnerability to scams/fi nancial exploitation, potential for wandering/ elopement from the home, falls, and/or other safety/fi re hazards? Is the physical structure of the home and/or immediate neighborhood/environ- ■ ment unsafe? Is the individual’s condition impaired to the point that they cannot care for their ■ basic needs, even with available assistance?

Each individual’s situation needs to be carefully assessed, and even then if the older adult in question remains mentally competent, he or she has the right to continue to live anywhere that he or she chooses, even if we as the professional and/or family member feel that this is not in his or her best interest. Oftentimes, the most diffi cult issue is the determination of mental competency. If as a professional working with older persons you ever question someone’s mental competency and feel that they may be vulnerable or unsafe, pursue an in-home assessment from a competent professional. If you are that pro- fessional and are still uncertain, make a referral to state adult protective services. No mat- ter what the situation, try not to project your personal preferences and/or value system on the older persons that you may serve. It is important to remember that one person’s shack may be another person’s castle.

The Changing Paradigms of Work and Retirement: Work Versus Retirement

In the traditional view of aging, individuals viewed work and retirement as two separate life events with work preceding a time of leisure in retirement. However, as discussed earlier in this section, this paradigm is not necessarily true today, especially for Baby Boomers, the majority of whom wish to continue to work in later life. In the new para- digm of aging, traditional “retirement” is changing from a time of ongoing leisure, to a time for learning, self-discovery, and meaningful work. For those who embrace this new paradigm of aging, it is a time of redirection, reinvention, rejuvenation, rewiring, and renewal. It can be time to revisit and renew the interests, dreams, and passions of one’s youth, which for many were set aside earlier in their lives due to the pressures of making a living and raising children.

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III. PRACTICAL APPLICATION: THE DIVERSE LIVING CONDITIONS OF OLDER PEOPLE 171

Helping Older Persons to Rediscover Their Life Purposes

According to Jim Emerman, former researcher with the American Society on Aging, in the September/October 2006 edition of Aging Today, “To be successful in the aging process one needs purpose in life; whether one fi nds that in faith-based organizations, political activity, involvement in the arts and humanities, or in volunteerism. Purpose resonates with health and creativity.”

It is estimated that many older persons have lost sight of their life purposes. This can be the result of the many ageist stereotypes and myths held in society. As individu- als age, they often feel pushed aside and undervalued in a youth-oriented culture. As a result, many older persons buy into these stereotypes and lose their sense of purpose.

As an experiment, in speaking to groups of both young schoolchildren and older adults, this author has asked the question, “What do you want to do when you grow older?” The children readily respond with a wide range of hopes and aspirations, where few, if any, older persons respond to that inquiry.

What Is Life Purpose, and Why Is It Important?

According to Merriam-Webster’s Collegiate Dictionary (2008), purpose “something set up as an object or an end to be attained” (page 104). In other words, in order to have purpose one must take intentional action toward a goal or an end to be attained. This requires knowledge of one’s goal, as well as planning and action toward that goal.

On the other hand, life purpose might be defi ned as

The primary reason for one’s existence; ■ What one is here to do while they are alive; ■ The overall meaning of one’s life that shapes who they are and all that they do; ■ or One’s own personal mission statement. ■

Having life purpose is important to the health and well-being of older persons. Those who have a clearly defi ned life purpose tend to have improved physical and men- tal health, positive and meaningful relationships with others, the ability to rekindle the passions of their youth, and an optimistic outlook on life. Far too often, for those lacking life purpose, the old adage remains true . . . if you fail to plan, then you plan to fail.

Those who choose gerontology as a profession should recognize as part of their role the need to help older persons rediscover their life purposes. How might this be accom- plished? First, as outlined in detail in the Part I Practical Application, work diligently to dispel and counteract ageist stereotypes and myths. Second, utilize opportunities to encourage older persons to identify their life purposes, and then guide them to create short- (6- to 12-month) and long-term (3- to 5-year) goals and to take appropriate action toward these goals, periodically evaluating their progress toward them.

When it comes to life purpose, I believe that Victor Hugo said it best, “There is noth- ing like a dream to create the future.”

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