Rising Costs Strain Budgets for Many Low-Income Older Adults

Financial pressures are increasingly eroding the affordability of everyday life for low-income older adults, according to a recent report from the AARP Public Policy Institute (PPI) [Medicare Rights Center]. The study, which analyzed data from the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey, reveals that essential costs for millions of older Americans are rising faster than their incomes, forcing many to rely on savings or incur debt to cover basic needs [Medicare Rights Center].

Basic Needs Consume Most Income

For households with older adults (aged 50 and above) living on low incomes, a significant portion of their budget — over 80% — is dedicated to essential needs. This includes housing (36%), food and groceries (20%), transportation (15%), and healthcare and insurance (12%) [Medicare Rights Center]. In comparison, higher-income households in the same age group spend 73% of their budget on these necessities. The disparity is particularly noticeable in housing and food costs, which account for 56% of spending for low-income older adults versus 46% for other older households [Medicare Rights Center].

Healthcare also presents a substantial financial burden for this group, consuming 12% of their budget. This is higher than both other 50+ households (10%) and low-income households without an older adult (3%) [Medicare Rights Center].

Spending Outpaces Income Growth

Over the past two decades, low-income households with older adults have experienced a sharp increase in expenses for basic necessities. Even after adjusting for inflation, food costs have risen by 27%, healthcare by 17%, and housing by 15% [Medicare Rights Center].

While the average post-tax income for low-income 50+ households did see a modest increase of about $2,700 over two decades (from approximately $18,600 to $21,300), average annual expenses grew much faster, increasing by $8,500 (from roughly $27,600 to $36,100) [Medicare Rights Center]. This widening gap suggests that many are struggling to keep pace with the cost of living.

Implications for Financial Security

This financial squeeze has serious implications for the well-being of many older adults. With rising costs and stagnant income growth, previous research indicates that individuals often bridge this gap by depleting savings, falling behind on bills, or accumulating debt [Medicare Rights Center].

Notably, in 2024, one in four Medicare beneficiaries (16.5 million people) had an income below $24,600, and one in ten had either no savings or were already in debt [Medicare Rights Center]. These figures underscore the vulnerability of many older adults to escalating costs and highlight the urgent need for strategies to enhance financial security and access to affordable care.