Press release: CFSI & AARP Foundation Survey: Today’s Low- to Moderate-Income Adults Over 50 Face Difficult Financial Challenges
The Center for Financial Services Innovation (CFSI), the nation’s authority on consumer financial health, together with AARP Foundation, a national leader in the fight to end senior poverty, today announced the release of a new report based on the U.S. Financial Health Pulse report data that shows 83 percent (42 million) of the estimated 50 million low- to moderate-income people over the age of 50 (LMI 50+) living in America are struggling with some or all of the components of their financial lives.
The new report, “Redesigning the Financial Roadmap for LMI 50+ Segment: New Challenges and Opportunities,” offers an in-depth look at the increasing financial insecurity of LMI 50+ and the major factors contributing to a more complex financial reality for them than for past generations. The study also found that many in this cohort would like to retire but cannot, while others have been forced to leave the workforce due to illness or a disability.
The new report underscores how this second act of life has changed for LMI 50+. The traditional pattern of saving and paying off debt while working in order to retire comfortably has been replaced with far more complex scenarios and, for many, delayed retirement. Uneven income, limited savings, debt burdens, medical shocks, and multi-generational living situations are dramatically influencing the financial health of the LMI 50+.
“For too many low-income older adults, the later years are a source of stress instead of something to look forward to,” said Lisa Marsh Ryerson, president of AARP Foundation. “AARP Foundation works across sectors to develop new, sustainable solutions so vulnerable older adults can achieve a more financially stable future.”
The report identified specific financial challenges facing the LMI 50+:
LMI 50+ Savings Shortfalls & Debt Burden
- More than half (51%) have liquid savings of less than three months of expenses, and only a quarter (26%) have an emergency savings account.
- More than 6 in 10 (61%) indicate they don’t have savings in an employer-provided or individual retirement account. For those with savings in either account, the median amount is $20,000, far less than recommended for a comfortable retirement.
- The vast majority (81%) have some amount of debt, with half (48%) reporting their debt isn’t manageable.
- More than a third (36%) with debt report that their debt has delayed or prevented them from saving for retirement.
LMI 50+ Medical Shocks & Multi-generational Living
- Overall, 38% had to forgo health care or medication in the past year because they couldn’t afford it.
- Nearly a third (31%) indicate they’re supporting someone financially who lives outside of their household.
- Households of three or more people report having higher financial stress (87%) than households with one or two individuals (82%). Of households with three or more people, 83% report that their financial stress leads to negative impacts on their family life.
Opportunity for Innovation
The financial challenges facing so many LMI 50+ individuals represent both an urgent need and a substantial opportunity for financial services providers to offer better products, programs and tools. Innovators and fintechs have been forward-thinking in developing technology solutions for other demographic groups such as millennials, but the LMI 50+ have typically been overlooked or neglected.
According to the report findings, the LMI 50+:
- Are open to using digital technology to manage aspects of their financial lives.
- Appreciate being able to monitor transactions and pay bills online.
- Care about security, but not in a way that limits the use of technology.
- Desire relevant, actionable financial education and coaching for everyday financial management.
- Use technology-centric innovations, but have differing levels of comfort with high-tech vs. high-touch engagement.
By leveraging the willingness of LMI 50+ to use financial technology to help mitigate some of these challenges, financial services companies, nonprofits and fintechs have an enormous opportunity to create new tools and adapt existing technologies for the LMI 50+ cohort. Focusing innovations in these specific areas could lead to better navigation of tight budgets, savings buildup, and the management of everyday finances in order to accommodate planning for long-term goals.
The LMI 50+ report used data from the CFSI’s inaugural U.S. Financial Health Pulse survey which was fielded between April and July 2018. In addition to the survey data, CFSI incorporated focus group research to learn directly from members of the LMI 50+ segment. Insights from the focus groups were used to create personas to bring the report findings to life.
Photo courtesy of Images Money.