Older persons face many challenges including paying for medical care, mental incapacity, economic insecurity, end-of-life health care decision making, and housing. As people age, their needs change. For example, people of 65 years or older often choose different housing as their physical and mental needs, tastes, and economic situations change.

According to gerontologists, old age can cover a 30 year time span from age 65 until age 95. These experts classify old age into three periods: The "young old" from age 65 to 75; the "old" from 75 to 85; and the "old old" after age 85. Men who attain age 65 have a life expectancy of 15 years while women are expected to live another 19 years. This means that half of the people who reach age 65 will still be alive 15 to 20 years later.

Those who are 75 or older tend to find that their housing no longer meets their requirements, and after age 85, most are concerned with physical inability to live independently and/or the propriety of their housing. And elderly people with special medical needs must often decide whether their needs can be met best at home, in an assisted living facility, or in a nursing home.

Since American housing depends on the homeowner being able to drive, there are significant difficulties for those who can not drive. And even those who stay physically and mentally active find that after retirement, economic considerations sometimes require new housing arrangements.

Although the Age Discrimination and Employment Act for 1994 prevents older employees from being legally be fired because of their age, the average retirement age is slightly above age 63. Because the average life expectancy at age 65 is 19 years for women and 15 years for men, and because most retirees experience a significant drop in income, less affluent retirees must be able to replace the loss of employment income for 15 to 30 years. This is a problem.

Although more than 90 percent of retirees receive it, Social Security was never intended to -- and does not -- totally replace the loss of employment income. For example, while lower income retirees can expect Social Security to replace only 43 percent of lost wage income, those whose income was greater than the amount subject to payroll tax is a much lower percentage.

Employer or work-related pensions are a major source of income for retirees. About one-half of the current work force is covered under private pension plans, and almost a third of current retirees receive some amount of private pension based on prior employment. The amounts of these private pensions varies from only a few dollars per month to generous benefits that sometimes include health care.

But regardless of the amount of pension paid at retirement, most private pensions will lose value over time because of inflation because -- unlike Social Security -- few pensions are indexed to keep pace with increased living costs. This means that retirees who receive private pensions will see their spendable income reduced over time. In other words, what may seem to be a generous pension at age 65 may seem small at age 80. And, as the value of the pensions declines, so does a retiree's ability to afford adequate housing.

Generally speaking, older persons have larger net worth than younger persons, primarily because of the increased value of their homes, no mortgage debt, and savings that are no longer reduced by college expenses.

Although retirees try to supplement Social Security pensions with income from savings, income derived from investments generally does not keep pace with inflation unless the older person either (1) reinvests part of the income or (2) annuitizes the savings by drawing down on the principal. And, for the majority of seniors, the income derived from savings will probably provide less buying power as years pass. Bottom line: Those who rely on savings and a pension may find that the decline in their income will not allow them to afford either the lifestyle or the housing they chose when they retired.

While some elderly persons receive financial assistance from their children or other family members, the amount received is often insufficient. While some elderly persons move in with their children, most prefer to live independently -- even if that means living more frugally. Other kinds of economic assistance available to older persons include governmental service programs such as Meals on Wheels which can be used to help free income for the elderly person.

Generally speaking the most valuable asset owned by most people is the family home. Due to inflation which exceeds the consumer price index in many areas of the country, a growing number of older people have large home equities; however, while this asset increases net worth, it does not create a higher standard of living than when the house was worth less. Bottom line: There are more "house poor" elderly who have greater equity and low income.

For these reasons, many elderly people are looking for ways in which to convert home equity into spendable income while keeping quality housing. Some have chosen to try reverse mortgages, a financial transaction in which the homeowner borrows against the home equity without making payback until the house is sold or the owner dies.

Another source of high net worth for older people is pensions. When they retire, some pension plan participants take – or have the option of taking -- a lump sum distribution from their pension plan. Although it might be a good idea for some to "roll over" the lump sum distribution into an Individual Retirement Account (IRA), others choose to take distributions of some or all of the potential lump sum in order to have the capital to purchase better housing.

Because of the increasing life expectancy, the age of those who inherit is growing older. This means that inheritance will be a greater source of financial support for older persons. Today, if an American woman lives past age five or ten, her life expectancy is more than 80 years. This means that her children will not inherit from her until they reach 50 or 60. That’s why it will be more and more common for people to receive inheritance either before or after retirement. And inheritance at an older age can dramatically change the type of housing the retiree can afford.

About 70 percent of people who have reached age 85 or older are widows or widowers. And the death of a spouse affect the survivor not only emotionally, but also economically. For example, because Social Security stops at the recipient's death, a surviving spouse who was previously drawing a monthly check equal to 50 percent of the deceased spouse's Social Security income will now be eligible to an amount equal to 100 percent of what the deceased spouse was receiving. This means a significant loss of income when the total Social Security payment is reduced.

So long as a an annuity is a "two life annuity" – i.e., calculated to pay the same amount until the death of the second annuitant, there will not be an economic loss; however, pension survivor benefits are often less than the benefits that were paid to the participant in the pension plan.

The cost of a spouse’s final illness can be costly: Even with Medicare, the survivor spouse will generally be required to pay out of pocket expenses and the cost of the funeral. If the deceased spouse was the victim of chronic, long-term illness prior to death, there is generally a serious depletion of the couple’s financial resources. And, prior to a family relying on Medicaid to help pay the long-term care expenses of the deceased spouse, most of the assets will have been eaten up before qualification -- meaning that the survivor often has much less for his or her support than had been planned. Being placed in this situation often requires surviving spouses to reevaluate their housing and other economic needs. In these situations, children and other family situations wind up dictating where the older persons live and the kind of housing they live in. According to statistics, the majority of elderly people live within a 50 mile radius of their children.

That’s why people should begin planning for later life housing before retirement and while in their fifties. Considerations include the potential of relocation after retirement or whether the housing pattern they select at this age will be appropriate for their retirement. What is appropriate at age 65 may not be appropriate at age 80. In addition, individuals who relocate in their mid 50's are often at the peak of their earnings. Those who relocate after retirement often face reduced financial circumstances.

© 1997 Flying Solo