How Much Money Will Your Parents Need to Stay in Their Own Home? The Elder Index Can Help You Find Out
As people age, most want to live in their own homes as long as possible. Determining how much money your parents may need as they age, however, can be challenging. Most retirement calculators offer numbers based on national averages and don't take into account how healthy a person is. A new resource is now available which could be extremely valuable for caregivers.
The Elder Index
The UMass Boston Gerontology Institute recently developed the Elder Index which measures the income that older people need to meet their daily living expenses, while staying independent in their own homes. It has been calculated for every county in the United States. Living expenses can be calculated based on the following variables:
Whether the individual lives alone or with a spouse/partner
Whether the individual rents, owns a home and has no mortgage, or owns a home with a mortgage
Whether the individual is in excellent, good, or poor health
It should be noted that the expenses are based on a "bare-bones" budget which excludes restaurant meals, vacations, gifts for grandchildren, etc.
The Congressional Budget Office has praised the Elder Index for its geographic specificity, focus on elder-specific expenses, and household-level measurement.
An online Elder Index calculator is available which allows users to select the appropriate variables for household, housing status, and health status, and then compare monthly expenses across up to four counties for the following categories of expenses:
Housing
Food
Transportation
Health Care
Miscellaneous
Using the Elder Index to Support Caregiving
Finances are always a concern as people age. Researchers at UMass Boston have found that in every state in the United States, at least 41% of older people who live alone have incomes that fall below the Elder Index.
From a caregiving perspective, the Elder Index could be useful for adult children who are responsible for their parents' finances. The tool offers insight into minimum living costs based on where a family member's lives and their health. For financial planning purposes, I think the estimates of food, transportation, health care, and miscellaneous are most useful. Housing expenses, such as rent, mortgage payments, or other housing-related expenses, are highly individual and should be fairly easy to gather on a case-by-case basis.
With the expense estimates from the Elder Index as a starting point, it could be valuable to:
Develop a more comprehensive estimate of living costs by adding in expenses for "nice to haves" such as restaurant meals or vacations
Compare current grocery bills to the food cost estimates provided by the Index
Project how costs may increase as a person's health declines over time
Add in estimates for in-home care
Evaluate what the financial impact would be, if a family member moved to a different part of the country (or even a different county in the same state) in order to live closer to children or other relatives
Although one of the primary purposes of the Elder Index is to help public policy makers develop benefit programs that address the true needs of older individuals, this tool is also a great resource for families as they consider the financial implications of aging in place. To learn more about the Elder Index, a webinar originally broadcast on January 16, 2020 can be viewed at the Grantmakers in Aging website.