Financial Support for the Older Population
As reported by the Administration for Community Living (2015), there were over 39.6 people in the older population bracket in 2009. This accounted for 12% of the total population in the country. It is estimated that in 2030, the older population will have increased to 72.1 million people, a number that will have increased double fold to the figure reported by the break of the millennium. This means that the current trend where the federal funding for the ageing population will increase even more marginally. There are a variety programs designed for the ageing population.
These programs are meant to ensure that this population has a safety net and also guarantees a minimum standard of income and healthcare for this population. In this backdrop, this paper explores the various ways through which the ageing population gets income, the expenditure against this income and the reforms that can be performed on the support systems installed by the government in order to ensure that there is a balance between the income and the expenditure. The paper will also discuss the economic effect that this population group has on the family members who provided care and amenities for them as well as the economic effect on the society.
Sources of Income for the Older Population in the United States of America
Social Security
The older population has diverse sources of income. They depend on this income to lead an independent life. All there are many sources of income (Wu, 2012). The most prevalent source income for the older population still remains the social security. Social security is still the mainstay when it comes to retirement income for many elderly Americans (Wu, 2012). Social security as a source of income accounts for four dollars of income of every five dollars that older people in the low to moderate income bracket have (Wu, 2012). The fact that social security is the most prevalent source of income is evidenced by the fact that in 2012, up to 84% of the older population (36 million people) received their social security payments (Wu, 2012).
The average in terms of social security payouts that were received was 14, 229 dollars. The median was 13, 972 dollars. Based on the fact that men have higher lifetime earnings, the male component of the elderly population receives more social security benefits compared to the female component (Wu, 2012). The median figure for the male component of the elderly population is 36% higher compared to the median figure for the females. The most dependent elderly people on the social security benefits are those with low income (Wu, 2012).
Statistics shows that 38% of the entire income for the older population came from the social security benefits. In the lowest income quintile, the social security benefits accounted for 82.5% of the entire income (Wu, 2012). The significance of social security for this population is also shown by its influence in keeping the poverty levels low in this population. In 2012, the social security benefits were responsible for keeping 15 million people above the age of 65 years out of poverty (Wu, 2012). Statistics shows that the removal of the social security as a source of income would increase the poverty rate in this population group from 9.1% to 44.4% (Wu, 2012).
Pensions and Retirement Savings
Besides the social security benefits, the regular made from the pensions and the retirement savings form another significant source of income for the elderly population (Wu, 2012). This is a significant source of income for 13 million people over 65 years. The mean figures for this income were 17, 914 dollars while the median figure was 12, 000 dollars. The older males in this population group are 38.8% more likely as older women at 23.2% to regard the pensions and retirement savings as an important source of income (Wu, 2012). For the part of the population that receives pensions and retirement savings, the male component of the population receives a median figure that is 71% higher compared to that of the female component of the population (Wu, 2012).
Earnings
Another source of income for the elderly population is individual earnings. This source of income is becoming increasingly important for the older population in the United States (Wu, 2012). This is because people are working past the retirement age of sixty-five years. Based on statistics reported in 2012, as many as 9.3 million people who are sixty-five years and above had individual earnings (Wu, 2012). For this cohort of the elderly population, the median amount of the earnings was 25,000 dollars. The average amount of the earnings for the same cohort of the elderly population was almost two times the median figure at 44,470 dollars (Wu, 2012).
The importance of this source of income for the elderly population is shown by the fact that both the median and mean figures were higher when compared to similar figures for any other source of income for the older population (Wu, 2012). The divide between the genders is skewed towards the male gender. Statistics showed the male members of this population (27%) have a higher likelihood to have earnings compared to the female members of this population group (17.2%) (Wu, 2012). There is also a gender disparity in terms of the median amount where the figure for the males is 78% higher than that of their female counterparts at 32,000 and 18,000 dollars respectively (Wu, 2012). The difference is because of the fact that older women have a higher likelihood of being part-year workers, working part time and having jobs that pay low wages (Wu, 2012).
Income from Assets
Almost half of all the senior citizens have received interest that is generated from the assets they have held in treasury notes, bonds, interest-bearing savings, certificates of deposits and from their checking accounts. This is based on statistics from 2010 where 49% of the senior citizens were found to have income from their assets (Brandon, 2012). The same statistics showed that 19% of the retired population received dividends in payments from mutual fund shares and stock holdings (Brandon, 2012). 9% of the retired population also got extra income through royalties earned from the work that they had done earlier on in their careers of by renting out their property (Brandon, 2012). Irrespective of the high number of older population who receive income from their assets is high, the amount received in income is very small. In fact, Brandon (2012) reports that the medial value for the income asset in 2010 was 1260 dollars.
Expenditures of the Elderly Population
The elderly population has needs that require them to spend some or all of the income earned. The categories in which these expenditures are made include their homes, health, entertainment, food, clothing and transport. Statistics shows that most of the expenditure by the elderly population is on their home with as much as 39% of the income going into the expenses of their homes. This was reported in 2001. As the years pile on, the amount in expenditure for the home has increased. Statistics show that the percentage of the expenditure that goes to the home increased over the years with the highest reported being 43% in 2003, 44% in 2005, 46% in 2007 and 47% in 2009 (Banerjee, 2012).
Statistics have also showed that the expenditure for the elderly population decreases with increase in wage. For instance, in 2009, the percentage of the expenditure for the home for those aged between 50 and 64 years was 47%. In the cohort of 65 to 74 year, the total expenditure for the home averaged at 44%. In the cohort of 75 to 84 years, the total expenditure on home averaged at 42%. This showing a reduction in expenditure as the age increases (Banerjee, 2012).
Reforms to Balance Income and Expenditure
The design of pension systems is to provide a steady income for the individuals who might suffer losses in their capacity to earn as a result of their advanced age, the death of those in the family who earn the wages or suffer disability. Reforms aimed at balancing the income and the expenditures of the older population should be effect earlier on in the careers so that they are effective upon retirement. This calls for the calculation of premiums in used in the retirement benefits schemes so that the contributions made are sufficient to meet the needs of the contributors upon retirement.
Economic Effect of the Aging Population on the Family Members
Caring for and the older person is very financially involving for the family members. On average, family members who were caring for an older member of the family spent 5,531 dollars, translating to 461 dollars every month. This is based on statistics from 2007 (AARP, 2008). These are direct expenses that are funded from the pockets of the family members. This is financially overwhelming, especially given the fact that this figure represents 10% of the median income by the family. Some of the most financially involving expenses include purchasing the prescription medication which are given, the installation of grab bars or ramps in order to make the house more accessible. It is also worth considering that there are other costs besides the costs funded directly from the pockets of the family members (Bird & Berry, 2011).
The indirect costs also have implications on the ability of the family members to not only meet the basic needs, but also to sustainably care for the older person. The other costs include the demands on time, the stopped of constrained contributions to personal savings and retirement programs, work schedules which are compromised and the breaks in the history of one’s work. In an instance where the older person is included in the insurance cover of the family member, the continued use also has an impact on the limits. Besides this, there are physical and emotional consequences to be considered (Bird & Berry, 2011).
Economic Effects on the Society
The sandwich generation in which many families find themselves is characterized by a scenario where they have to take care of both the children and the elderly members of the family. This has a significant impact on the society and the economy. As highlighted above, it is financially involving for family members caring for older family members. The effect of this on the society is that many of the families will postpone savings to fund the college education of the children. In order to cope with the financial burden of caring for an older person, families also postpone major purchases and any vacations that might have been planned (Bird & Berry, 2011).
In 2009, statistics showed that 27% of the caregivers who cared for older people reported to having experienced some degree of economic hardship due to the added responsibilities. 24% of the respondents reported cutting back on expenditure which was related to care as a coping mechanism. The effects on the society are both short term and long term. In the short term, there is a decrease in the spending power of the families. This affects businesses because such families have to reduce their spending because most of the money is taken up by the recurrent expenditures from the care of the older person. In the long term, this affects the investments in the society because the surplus cash in the families is used for the care of the older family member (Bird & Berry, 2011).
Cost Effective Programs
Under the current state of affairs, various programs for the elderly are covered under federal funding. Some of these programs include nutritional programs, education classes, access to senior centers elder abuse services, legal services, home delivered meals, selected caregiver support services, and consumer protection services. While all these services and programs have a cost implication, it is arguable that medical services take up the most of the federal budget for the older Americans. The Oregon State Department of Health Services (2009) estimate that after an individual has turned 65 years, they will live for seventeen more years on average. Out of this population, 80% live with one chronic health condition in the very least. In order to ensure cost effectiveness of the financial support programs, there is a need to reform the programs in order to encourage proper management and prevent hospitalization of the older Americans with chronic diseases. Additionally, the delivery of health services for this population should encourage home care as an alternative to hospitalization.
Conclusion
Financial support to the elderly population is an important tenet to the social fabric. It is vital that the people who have served the economy for most of their lives can live productive and independent lives after retirement. This calls for the reform of the current programs in order to better serve their unique needs. The necessity of such reforms is seen in the economic impact that this population has on their families and the society at large. It is actually imperative for the sake of development that this is achieved because as the paper has highlighted, the families at present are diverting resources to the care of the older population, thereby retarding development.
References
AARP. (2008). Valuing the invaluable: The economic value of family caregiving, November 2008 update. Insight on the Issues 13.
Administration for Community Living. (2015). Statistics on aging. Retrieved from
Banerjee, S. (2012). Expenditure Patterns of Older Americans, 2001‒2009. Retrieved from http://www.ebri.org/pdf/briefspdf/EBRI_IB_02-2012_No368_ExpPttns.pdf
Bird, C. and Berry, A. (2011). Potential later life economic impacts associated with family caregiving. Retrieved from http://ncsu.edu/ffci/publications/2011/v16-n2-2011-winter/bird-berry.php
Brandon, E. (2012). The 4 Most Important Sources of Retirement Income. Retrieved from http://money.usnews.com/money/blogs/planning-to-retire/2012/03/22/the-4-most-important-sources-of-retirement-income
econ_sec/2013/sources-of-income-for-older-americans-2012-fs-AARP-ppi-econ-sec.pdf
http://www.aoa.acl.gov/Aging_Statistics/index.aspx
The Oregon State Department of Health Services. (2009). Healthy aging. Programs which make a difference. Retrieved from http://www.oregon.gov/dhs/spd/provtools/healthy-aging- programs.pdf
Wu, K. (2012). Source of income for older Americans, 2012. Retrieved from http://www.aarp.org/content/dam/aarp/research/public_policy_institute/
