Hawaii may be paradise to many, but it's not cheap to live there for many seniors on fixed incomes.
By Michael B. Sauter, 24/7 Wall St.
The average older American living independently does not have the means to meet basic standards of living, according to a report published by Wider Opportunities for Women (WOW) and the Gerontology Institute at the University of Massachusetts Boston. The report, “Seniors nationwide are nowhere near economic security,” calculates the average income for retirees for each state in the country, as well as their costs of living. While older Americans in some regions are faring better than in others, their costs exceed their income by at least $1,000 per year in every state.
Based on the report, 24/7 Wall St. identified the 10 states with the largest gap between the costs of living and the average elderly income, also known as the economic security gap. In these states, the average independent senior is short at least $6,000 each year. In the worst case, the difference between expenses and income is more than $10,000 annually.
While there are no areas of the country where the cost of living is affordable for seniors, the states in Northeast and Southeast have the biggest problems. According to WOW CEO and President Donna Adkinson, seniors have lower incomes in the Southeast while Northeast states are the most expensive.
Most of the states with the largest disparity between elderly income and expenses have higher costs for all residents and are either in the Northeast or the Pacific. While expenses in these regions are higher than the rest of the country, basic necessities such as health care, food, housing and transportation affect the elderly even more — usually must rely on Social Security, pensions and noncash benefits to cover their costs.
Rent and mortgage payments are the biggest of these expenses, and the states in the Northeast and West Coast have among the highest home costs. According to Adkinson, “Housing cost is the largest expense for elders, and many retirees with fixed or largely fixed incomes pay for housing in markets driven by workers who are earning incomes adjusted for locally high cost of living.”
Rising health care costs also act as a heavy burden for seniors in these states. Between 2006 and 2009, the price of drugs used by older Americans rose by 26 percent, according to a report published recently by AARP. With health care costs among their biggest expenses, this increase is particularly hard on seniors. According to the WOW report, the average senior in several states needs to spend more than $400 each month on medication. As evidence of the problem, five of the six states with the most expensive health care for the elderly also have the largest economic security gaps.
Some of the states with the biggest economic security gap for the elderly are in the Southeast, where residents have a lower median income. Four out of the 15 worst states, which include Alabama, Louisiana, Mississippi and Tennessee, have only moderate costs of living. But because older residents in these states have less money, they cannot afford even these relatively low expenses.
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24/7 Wall St. identified the 10 states with the biggest difference between median income for independent senior citizens and the amount WOW’s Economic Security Database estimates they need to meet a basic standard of living in their state. To identify the biggest cost drivers for these elderly residents, 24/7 Wall St. used the Economic Security Database’s Elder Index to calculate expenses by state for a single, renting, independent person over 65.
These are the top five states where seniors cannot afford to live.
1. Massachusetts
- Elderly economic security gap: $10,248
- Median elder income: $16,800 (20th lowest)
- Annual cost of comfortable living for an elder: $27,048 (5th highest)
- Life expectancy in years: 80.1 (6th longest)
- Housing costs per month: $994 (6th highest)
- Health care costs per month: $440 (3rd highest)
The average, single, independent senior earns just $16,800 a year in Massachusetts, the 20th lowest amount in the country, according to WOW’s Elder Index. Meanwhile, the costs of living in the state for a retiree to live securely are $27,048 a year, the fifth-highest in the country. The resulting gap between income and expenses is over $10,000 annually — by far the largest in the country. In order to meet their basic needs, Massachusetts residents need to spend $440 each month on health care, $243 on food and nearly $1,000 on housing.
2. New York
- Elderly economic security gap: $9,244
- Median elder income: $17,000 (21st lowest)
- Annual cost of comfortable living for an elder: $26,244 (6th highest)
- Life expectancy in years: 80.4 (4th longest)
- Housing costs per month: $1,057 (4th highest)
- Health care costs per month: $370 (10th lowest)
A retired single New York resident makes $17,000 each year from pensions, Social Security and other sources of income, according to WOW’s Economic Security Database. This income, which is below the national average for the elderly, does not come close to the estimated $26,244 required annually if New York seniors were to live comfortably and with economic security. For retirees, health care costs are actually relatively low in the state. Transportation costs are just $210 per month. But the average single elder spends $12,684 per year on rent. The good news for New York retirees is that Fiserv projects home prices will fall in the state by 5.9 percent by the third quarter of 2012. While home prices will increase nationwide after that for several years, they will increase at just 1.8 percent annually in New York, slower than all but one state.
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3. Hawaii
- Elderly economic security gap: $8,904
- Median elder income: $20,700 (3rd highest)
- Annual cost of comfortable living for an elder: $29,604 (the highest)
- Life expectancy in years: 81.5 (the longest)
- Housing costs per month: $1,329 (the highest)
- Health care costs per month: $377 (12th lowest)
According to the latest census figures, 14.5 percent of Hawaii’s population is 65 and older, the eighth-highest proportion in the U.S. Life expectancy is 81.5 years, the longest in the country. According to MERIC’s cost of living index, expenses are higher in Hawaii than anywhere else in the country for every major category except health care, in which Hawaii’s is second. This high cost of living also affects Hawaii’s substantial elderly population. According to WOW’s economic security index, the annual cost of living for a single, renting retiree is just under $30,000 — the highest in the country. The biggest of these expenses is housing, which comes to $15,948 each year — by far the largest in the country.
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4. Connecticut
- Elderly economic security gap: $8,020
- Median elder income: $19,580 (7th highest)
- Annual cost of comfortable living for an elder: $27,600 (3rd highest)
- Life expectancy in years: 80.2 (5th longest)
- Housing costs per month: $1,004 (5th highest)
- Health care costs per month: $430 (6th highest)
Costs for all Connecticut residents, regardless of age, are in the top 10 for every measured category, including transportation, health care and utilities, according to MERIC’s cost of living report for Q4 2011. These costs are a heavy burden on the state’s retired citizens, as well. Connecticut’s seniors make $19,580 a year, the seventh-highest income in the country. However, the minimum income required to meet basic needs is $27,600, the third highest in the U.S., according to WOW’s Economic Security Database. The difference amounts to more than $8,000 each year.
5. New Jersey
- Elderly economic security gap: $7,960
- Median elder income: $20,000 (5th highest)
- Annual cost of comfortable living for an elder: $27,960 (2nd highest)
- Life expectancy in years: 79.7 (tied, 15th longest)
- Housing costs per month: $1,091 (2nd highest)
- Health care costs per month: $442 (2nd highest)
The average retiree’s income in New Jersey is $20,000, the fifth-highest in the U.S. Expenses, however, are even higher, according to WOW’s Economic Security Database. The average senior citizen renting an apartment spends nearly $1,100 per month on housing, and an additional $437 per month on health care. The combined annual costs of housing and health care come to $18,396. Fortunately for senior citizens living in the state, transportation costs are the lowest in the country, at just $202 per month.
See the next top five states where seniors cannot afford to live.
