The Forgotten Middle-Class Struggle In Retirement

Lower-middle-class Americans were able to carve out a decent living for themselves which included a comfortable retirement pre-2000. Unfortunately, research indicates that the modern hard-working class of people is now going to face a much harder time in retirement, leaving many to struggle with poorer health, worse economic outcomes, lower homeownership rates, and increased disability as they age. 

Additionally, policymakers consistently continue to forget about the lower-middle-class people who do not qualify for most assistance programs, if any at all. Alternatively, upper-middle-class Americans are experiencing the opposite, in general, this demographic is benefiting from improvements in life expectancy and wealth. 

For this study, the researchers utilized data from the Health and Retirement Survey and a microsimulation called the Future Elderly Model, to estimate future disability and life expectancy for cohorts of individuals in the 50s at different times between 1994 to 2018. Individuals were grouped by economic status: upper, upper-middle, lower-middle, and lower. Results showed that healthy life expectancy at age 60 increased by 1.5-2 years for those in the higher economic groups but was either stagnant or decreased for those in the lower groups, and a similar pattern was found for the number of future life years without disability. Health status at the age of 50 for both upper and lower classes has decreased over the past 20 years, but health is deteriorating at a faster rate for those in the middle class due to increased hypertension, diabetes, and heart disease. 

“Our findings suggest that today’s lower-middle class will spend a larger proportion of their older life with poor health,” said Jack Chapel, study lead author and a Ph.D. candidate in economics at the USC Dornsife College of Letters, Arts and Sciences. “For example, an average 60-year-old woman in the lower-middle in 2018 will reach age 84. We project that almost 40% of her remaining years will be lived with a disability – an increase since 1994.”

American policymakers continue to focus on providing assistance for disadvantaged Americans but continue to neglect those one step up on the income ladder who manage to limp by paycheque to paycheque. This group of neglected Americans is called the “forgotten middle class”, they are overlooked because they do not qualify for assistance such as Medicaid, housing vouchers, or food stamps because they work and earn “too much” income, yet they lack the adequate resources to cover the increasing costs of food, utilities, insurance, housing, education, and healthcare. 

The researchers report that the combined value of financial and housing wealth along with other resources including income, health insurance benefits, and quality of adjusted life years after reaching the age of sixty increased by 13% of those in the upper-middle-class groups between cohorts. However, those in the lower-middle-class groups only experienced a 3% increase compared to their counterparts from years past. 

“Our study projects lower-middle Americans will spend a longer proportion of remaining life with significant healthcare needs, but with no more economic resources to attend to those needs than similar cohorts had 20 years earlier,” said Dana Goldman, dean and C. Erwin and Ione L. Piper chair of the USC Sol Price School of Public Policy and the co-director of the USC Schaeffer Center.

“The public conversation about inequality tends to focus on the challenges faced by only the most vulnerable populations,”  said Bryan Tysinger, director of health policy simulation at the USC Schaeffer Center and research assistant professor at the USC Price School. “But our models found that there has been an important divergence in the middle of the economic distribution.”