Income Needs of Older Individuals

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  • 0:04 Income Needs and Sources
  • 0:49 Sources of Income
  • 1:49 Income Needs
  • 3:32 Older Adults & Poverty
  • 4:36 Lesson Summary
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Lesson Transcript
Instructor: Christine Serva

Christine has an M.A. in American Studies, the study of American history/society/culture. She is an instructional designer, educator, and writer.

How will you need to spend your money as an older adult? This lesson considers how income needs and income sources change as we age and what financial challenges older adults face.

Income Needs & Sources

When you imagine yourself as you age, how do you think you'll spend most of your money? Do you anticipate you will be better off financially when you are older or less secure?

The funds you need in order to live your life are known as your income needs. Where your money originates is known as an income source. For instance, your income needs may be a particular dollar value, such as $2,000 per month, in order to cover your expenses. The sources of the money to pay your expenses is often your job, which provides employment income.

This lesson will discuss the shifting income needs and sources of older adults and asks you to imagine yourself in the shoes of someone going through the later years of life.

Sources of Income

During the majority of their adult years, most people will obtain their income from employment, business income or that of another person in the household, such as a partner or spouse.

As we age, our main source of income tends to change and involves more of a combination of sources. A person may live on income from social security and personal savings and investments they have made over the years. Some may receive a pension from a private company, military, the government or a union for their years of service. If the person has a paying job, they would also continue to have employment income.

If an older adult has invested in an annuity or other form of long-term insurance, or has lost a spouse or other loved one who had life insurance, they may also receive a benefit from these policies. Still others may require public assistance - benefits provided through government services - if they qualify due to their financial circumstances.

Income Needs

You might imagine your income needs would decrease as you age because you will be going out less often, perhaps less interested in the types of activities you do now. While income needs do tend to decrease as you age, some researchers believe this is primarily due to a decrease in work-related expenses, such as transportation and eating out for convenience, and not because of a decrease in most other expenses. While not everyone has the financial means to do so, many adults wish to continue their level of activity as much as possible, if not increase their activity to stay healthy and engaged.

Even more pressing than opportunities for leisure are the health care costs experienced by older adults. As our health changes in our later years, we tend to require more medical care and services to maintain our quality of life and even our very survival. Even with health benefits, a person will still need to spend money out of their own funds to support their health.

Both housing and health care tend to make up the majority of income needs in older adulthood. Consider what it would be like to still have many of the typical expenses that you do during your younger years, such as housing, groceries and supplies, and utility bills. Yet you also have unexpected medical costs that pop up.

A person also has the potential to use all of his or her savings to cover the costs of a new housing situation that provides medical care, such as an assisted living facility or nursing home. Others may still have a mortgage to pay, making it so that housing costs do not necessarily decrease during their older years.

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