Americans of all ages, including older Americans, are underinsured against medical expenses, including premiums, co-pays, and other out-of-pocket costs. Most Americans are eligible for Medicare at age 65, leaving only 1.2% in the 65+ age group uninsured in 2021 (Keisler-Starkey and Bunch 2022). But Medicare coverage is no guarantee against high out-of-pocket costs. A typical Medicare-eligible senior still spends nearly $5,000 on health care in a year; 10% spend $13,800 or more; and the unluckiest 1% spend $29,800 or more.

Older Americans ages 55–64 have similarly high out-of-pocket costs. The average amount this group spends is $6,100, versus $6,600 for Medicare-eligible seniors (averages not shown in chart). Those with expensive conditions actually spend more than seniors—$18,900 or more for the unluckiest 10%, versus $17,600 or more for their 65 and older counterparts.

Older Americans ages 55–64 are healthier on average than those age 65 and older but are less likely to have government-provided health insurance. Most do not qualify for Medicare, and while the expansion of Medicaid eligibility under the Affordable Care Act reduced uninsured rates among lower-income older Americans, 9.4% of Americans ages 55–64 remained uninsured in 2021 (Katch, Wagner, and Aron-Dine 2018; Keisler-Starkey and Bunch 2022; authors’ analysis of IPUMS Current Population Survey microdata [Flood et al. 2021]). Though most out-of-pocket costs are capped for those with insurance (Rae, Amin, and Cox 2022), some still face high costs.

Higher medical expenses explain much of the higher poverty experienced by older Americans, based on the Census Bureau’s Supplemental Poverty Measure (see chart note). About 2% of Americans ages 55–64 fall into poverty after paying their health insurance premiums and other out-of-pocket medical expenses. The effects of health expenses are more severe for older Americans, as many retirees live on near-poverty incomes. Nearly three in 10 poor seniors age 65 and older are poor because of medical expenses.

Despite near-universal Medicare coverage, medical expenses have a big impact on senior poverty because aging is associated with an increase in conditions requiring medical attention and Medicare does not cap out-of-pocket expenses. Younger Americans ages 25–54 are less likely to experience poverty as a result of medical expenses as they are more likely to be healthy, to have sufficient income to keep them out of poverty, or to postpone costly health care which, while reducing expenses temporarily, can impact their health and financial status at older ages (Montero et al. 2022).

Medical expenses contribute to very high poverty rates experienced by older Black and Hispanic Americans, based on the U.S. Census Bureau’s Supplemental Poverty Measure (see chart note). Black and Hispanic seniors age 65 and older are more than twice as likely to live in poverty as white seniors due to a combination of lower incomes and high medical expenses.

Among those ages 55–64, medical expenses have a larger impact on poverty for Hispanic Americans than for white or Black Americans because Hispanic Americans are more likely to be uninsured (Keisler-Starkey and Bunch 2022). Black Americans are more likely to have near-poverty incomes than white Americans, but higher Medicaid eligibility limits the impact of health expenses on the share of Black Americans living in poverty because Medicaid caps out-of-pocket costs (Guth, Ammula, and Hinton 2021).

Black and Hispanic Americans are more likely than white Americans to qualify for social insurance in the form of Medicare eligibility before age 65 (due to a long-term disability) and dual eligibility for Medicare and Medicaid (which covers some costs not covered by Medicare) (Ochieng et al. 2021). This helps to offset some—but not all—of the higher costs associated with poorer health.

Medicaid pays for nursing home care and other long-term services and supports (LTSS) for seniors with limited resources, including those who have drawn down their savings to pay for such care. High rates of Medicaid coverage therefore serve as a measure of the financial risks associated with the need for LTSS.

LTSS expenses are generally not covered by Medicare (Medicare.gov 2022). Private long-term care insurance, meanwhile, is often inaccessible and expensive while offering limited protection (Sammon 2020). Even among the small number of seniors with private insurance, about a quarter will let their policies lapse, often due to cognitive impairments that make them more likely to need the long-term care that the insurance would have paid for (Friedberg et al. 2017).

While only 11% of seniors without long-term care needs enroll in Medicaid after age 65, most seniors who require long-term care for two or more years end up in the means-tested program. An estimated 59% of seniors requiring two to four years of LTSS, and 82% of those requiring five or more years of LTSS, will end up on Medicaid. Nursing home care is particularly expensive, with 77% of seniors who require nursing home care for two or more years enrolling in Medicaid (Johnson and Favreault 2020; not shown in chart).

Low earners face a greater risk than higher earners of requiring long-term care due to well-documented disparities in health and disability by socioeconomic status (Isaacs et al. 2021). Among seniors age 65 and older in the lowest lifetime earnings fifth, more than 3 in 10 (31%) will require two or more years of long-term services and supports (LTSS). Among seniors in the four higher earnings quintiles, roughly two in 10 will need two-plus years of LTSS.

Note that there is little difference in risk of needing LTSS among the latter four groups. This is likely because higher earners are more likely to live long enough to develop health conditions associated with advanced old age, offsetting their other health advantages relative to lower earners (Johnson 2019). Unlike individuals in the top four lifetime earnings groups, however, the adverse health effects of living in or near poverty for the bottom fifth of lifetime earners are not offset by their shorter lifespans and they face a higher risk of LTSS needs.

Though low earners are most affected, all seniors face a significant risk of needing to pay for LTSS for two or more years, with a concomitant increased likelihood of needing Medicaid to help with costs (see Chart 3D). Seniors 65 and older who need expensive nursing home care are at especially high risk of exhausting their resources. Even among those in the top earnings quintile, 43% of those who need nursing home care for two or more years end up on Medicaid (Johnson 2019; not shown in chart).

Many older working American households were struggling financially before COVID hit. These households therefore had less of a financial cushion to protect them from the economic fallout of the pandemic.

Over half (54%) of lower-income (bottom 50%) households ages 55–64 were financially fragile before the COVID-19 pandemic, based on their debt burdens, housing costs, and the savings they had available to access in an emergency. This is an increase in financial fragility from a third (35%) of such households in 1992.

In the wake of the Great Recession, rising mortgage debt, credit card balances, auto loans, and student debt hurt older households’ finances (GAO 2021; Butrica and Mudrazija 2020). As seen in the chart, older households across the income distribution experienced growing financial fragility between 2008 and 2012.

Wealthier older households—those in the top 10% of the income distribution—have roughly recovered to their 2008 levels. Households in the 50th–90th percentiles have also recovered to their 2008 levels but still face much higher rates of financial fragility than those in the top 10%; they are also much more financially fragile than their counterparts were in 1992. Households in the bottom half of the income distribution did not recover well from the Great Recession, and by 2018 they had reached historically high rates of financial fragility.

Other studies have found similar trends. A recent study by the Government Accountability Office (GAO) found that older households are more likely to be indebted than they were three decades ago, and a typical older household age 50 or older held roughly three times as much debt in 2016 as it did in 1989, adjusted for inflation (GAO 2021, not shown in chart). Butrica and Mudrazija (2020) found a significant increase in debt and falling credit scores, signs of deteriorating financial stability, among households age 70 and older, mostly due to increases in mortgage debt.

Rising debt levels are not necessarily cause for concern if they reflect rising homeownership or access to higher education among older households. However, a closer look at trends in indebtedness—such as rising home mortgage loan-to-value ratios among older homeowners—cautions against such a rosy view.

Among working households ages 55–64, over half of Black (57.0%) and Hispanic (50.7%) households were financially fragile before the COVID-19 pandemic, based on their debt burdens, housing costs, and savings they could access in an emergency. In contrast, only a third (33.4%) of older white households were stretched too thin to weather a financial shock.

These findings are in line with previous research showing that debt burdens have risen more for Black and Hispanic households than for white households. Between 1989 and 2016, the debt-to-asset ratio of the typical household age 50 or older increased from 8% to 17% for white households, from 16% to 35% for Black households, and from 17% to 37% for Hispanic households (GAO 2021).

Student loan debt is the fastest-growing type of debt among older American households. More than four times as many households ages 55–64 had student loan debt in 2019 compared with 30 years ago (12.2% in 2019 vs. 2.9% in 1992; not shown in the chart). At the same time, their debt burden has increased: The median education debt-to-earnings ratio (total student loan debt to annual earnings) almost doubled, from 15.8% in 1992 to 28.4% in 2019 (Schuster 2021).

Ballooning student loan debt among households ages 55–64 is only partly explained by an increase in the share of older Americans with bachelor’s degrees, which rose from 17.9% to 32.4% over this period (authors’ analysis of Current Population Survey microdata [Flood et al. 2021]; not shown in the chart). Some of the increase in older households’ student debt reflects parents borrowing to help pay for their children’s educations (Looney and Lee 2018). College costs have risen rapidly (Jackson and Saenz 2021), while many Americans are burdened with student loans despite not obtaining—or their children not obtaining—degrees (Siegel Bernard 2022).

Black households have seen the fastest increase in student loan debt. As shown in the chart, the share of Black households ages 55–64 with student loan debt grew fivefold between 1992 and 2019, while the share of Black Americans in this age group with bachelor’s degrees roughly doubled, from 8.1% to 17.9% (authors’ analysis of Current Population Survey microdata [Flood et al. 2021]; not shown in chart). This suggests that many of these households took on student loan debt for their children or grandchildren, or that the student loans are for their own education but college costs rose faster than earnings and fewer former students were able to pay off their debts before age 55. In either case, the higher debt puts additional pressure on these older households’ finances.

The recession triggered by the COVID-19 pandemic was highly unusual in that older workers suffered greater job losses than mid-career workers. In the six-month period from April to September 2020, the unemployment rate for workers age 55 and older averaged 9.7% (not shown in the chart), more than a percentage point higher (+1.1 ppts) than the 8.6% unemployment rate for workers ages 35–54. In contrast, from October 2009 to May 2010, the peak unemployment months of the Great Recession, the unemployment rate of older workers averaged 7.0%, 1.2 percentage points lower than the 8.2% unemployment rate of mid-career workers.

In typical recessions, older workers are less likely to be laid off than mid-career workers because they usually have more work experience and seniority. These factors offered less protection during the pandemic, since pandemic job losses were driven by the mass shutdown of nonessential sectors and a shift in consumer spending from services to goods.

The employment rate of seniors age 65 and older plummeted 18.6% between February and April 2020, an even steeper drop than that experienced by mid-career workers ages 35–54 and older workers ages 55–64, who both experienced 11.8% declines in employment rates.

Employment losses among workers age 65 and older were also more persistent than those of younger workers. The employment rate of mid-career workers had essentially recovered by August 2022; that of older workers ages 55–64 was only slightly below its pre-pandemic level (-1.7%). However, the employment rate of seniors remained -5.8% below its pre-pandemic level two and a half years later.

Some of the employment decline among older workers reflected an increase in retirements. Older workers in part-time jobs, or in occupations characterized by high physical proximity to other workers or to customers, were especially likely to call it quits (Davis 2021). For these workers, COVID disruptions, health and safety concerns, caregiving responsibilities, rising net worth, or other factors tipped the balance in favor of retirement. But for the majority of older workers, leaving the labor force was triggered by job loss (Davis and Radpour 2021).

Most unemployed older workers returned to the workforce, aided by a rapid recovery brought about by stimulus checks, expanded unemployment insurance, and other timely countercyclical measures enacted by Congress (CBPP 2022). Though the pandemic recession had an unusually severe impact on older workers, these workers would likely have fared much worse in a slower recovery with fewer supports for unemployed workers and their families, especially since unemployed workers in their 50s and older tend to remain out of work longer than young or mid-career workers (Johnson and Butrica 2012; Johnson and Gosselin 2018).

When the pandemic recession hit in early 2020, older workers without bachelor’s degrees experienced greater job losses than their college-educated counterparts. The most affected were workers over 65 without college degrees, one in five (21.0%) of whom found themselves out of work.

While many white-collar workers have been able to work from home during the pandemic, most non-college-educated workers in service-sector jobs did not have that option (Gould 2020a). Many of these workers were laid off or furloughed. Those who remained in the workforce were more likely to be exposed to COVID-19 health risks. These risks were particularly acute for older workers in meatpacking, caregiving, and other low-paid service jobs often deemed “essential” but not adequately compensated or protected (Hassan 2021; Farmand et al. 2020; Lewis 2021).

Though job losses were highest among workers 65 and older and among older workers without college degrees, some professional occupations, including teachers and nurses, have seen waves of early retirements due to deteriorating working conditions during the pandemic (Barnes 2022; Zhavoronkova et al. 2022).