Today, the Office of Economic Policy at the Treasury
Department released the fourth in a series of briefs exploring the economic
security of American households. This brief focuses on the economic security of older women. In this brief, we ask: Are older women at
greater risk of poverty or being unable to manage their expenses than other populations? Are there specific groups of women at
risk? What are the implications for
policy?
Compared with men, we find that elderly women are much more
likely to be economically insecure. We
attribute this finding to a variety of factors. Women live longer than men, meaning they have to finance a longer
retirement and that they are more likely to reach an age in which they must
finance disability costs. In addition, women
tend to have lower lifetime earnings than men. Finally, women are more likely than men to live alone and thus are less
likely to live with someone with whom to share economic risks.
In this brief, we assess economic insecurity in a number of
ways but focus on two measures: the poverty rate and the “overextended” rate—the
share of the population whose spending exceeds what it can afford based on its income
and annuitized wealth. We view this latter
measure as reflecting economic insecurity, because elderly women who are
overextended and on fixed incomes must reduce spending to live within their
means. For women with low levels of
consumption, this could entail cutting back on necessities like food and
medicine. Comparing different measures
of economic security, we find that the overextended share of the female
population is 29 percent, far higher than the poverty rate of 12 percent. The implication is that economic insecurity
is broader than the poverty rate implies.
We find that single women are far more economically insecure
on all measures than married women and that widowhood dramatically increases
the likelihood of becoming insecure relative to remaining married. Widowhood is associated with a large loss in
income and wealth; and while widows experience a large drop in household spending
at widowhood, they continue to cut spending at rates faster than single women
and married households.
We also find that disability is associated with economic
insecurity. The median disabled woman’s
household assets (including non-liquid assets like housing) are sufficient only
to finance six months in a nursing home, and the median disabled woman’s household
has financial wealth sufficient to cover less than half a month of nursing home
expenses.
Women who remain married throughout their elderly years, on
the other hand, do not experience high rates of economic insecurity. And holding constant marital status and
disability status, we do not observe sharp increases in economic insecurity as
women age. Notably, even though the
poverty rate rises for women as they age, the overextended rate falls as women
rely more on wealth to support themselves.
All told, our findings suggest that public policy should
focus on specific risks associated with aging, particularly living alone and
living with a disability. We note that
married couples might benefit from shifting more of their wealth from periods
in which both spouses are alive to periods in which only one spouse is alive. Such an outcome could be accomplished in the
private sector with greater use of financial products with survivor
benefits. Experts have also suggested
ways that public policy could help address the challenge, such as by
restructuring Social Security to increase survivor benefits. Looking at disability, we note that while
Medicaid and private long-term care insurance provide protection for some
households, there is still a large unmet need that is apparent when looking at
the economic security risks posed by disability.
Karen Dynan is the Assistant Secretary of Economic Policy at the Department of the Treasury.