San Francisco Bay Area event coordinator Monique Louvigny saves where she can. She drives a 10-year-old Prius, brings a thermos of coffee to work instead of frequenting a place with baristas, and enjoys a drive-thru pantry once a month.
Laid off at 57, “I sort of reinvented myself,” she says. She rebuilt her career as a freelancer, overseeing receptions and conventions for numerous businesses and institutions, including the local Young and Legion of Honor art museums.
But his income fell to less than $30,000 last year. “It’s irregular,” she said. “In January, I have 12 days of work.” In summer, she may only have three or four.
Ms. Louvigny, 64, feels lucky on two fronts. For health insurance, she is qualified for Medi-Cal, California’s Medicaid program. And two years ago, she paid off the mortgage on her relatively affordable Vallejo condo. A roommate pays rent, which helps cover maintenance costs and rising condo fees.
“I think I can hold out for two years, career-wise,” she said, and then she plans to start collecting Social Security benefits at her full retirement age, 66. .
Ms. Louvigny’s income places her in a defined category in a recent study in the journal Health Affairs as lower middle class for Americans nearing retirement. It’s a group that has steadily lost financial ground over the past two decades, with stagnant profits and fewer economic resources than in the early 1990s.
Not only do such losses portend a precarious retirement, they also have worrying implications for health and life expectancy, according to the study and others.
The upper middle class, on the other hand, is doing significantly better.
“There’s a lot of attention paid to inequality between the bottom and the top of the income distribution,” said study lead author Jack Chapel, an economist and doctoral student at the University of Southern California. “We wanted to focus on the middle class, where people are struggling. »
Drawing on data from the National Health and Retirement Study between 1994 and 2018, researchers found “a bifurcation” among Americans in their mid-50s, he said.
Indeed, they are now divided into two middle classes: the upper, more secure stratum (who, in 2018, had on average more than $90,000 per person in annual resources, including income and annualized value of net of their housing, retirement savings and pensions); and the increasingly precarious lower middle class. In 2018, people in this group had average annual resources of less than $32,000.
In the early 1990s, by contrast, “our lower-middle-class group performed fairly comparable to the upper-middle class” on measures of health and economic well-being, Mr. Chapel said.
Don’t linger. In two dozen years, the gap between them has widened. Homeownership, for example, declined by 5 percent among the upper middle class, but by 31 percent among the lower middle class, of whom only 54 percent owned a home in 2018.
For those still working, incomes rose 27 percent among the upper-middle class and fell 5 percent for lower-middle-class workers, adjusted for inflation. “They make less because they work fewer hours or at lower wages, or both,” Mr. Chapel said. They were also much less likely to have employer-sponsored health insurance.
Projected total financial resources over their lifetime after age 60—including income, savings, pensions, housing wealth, and public benefits like Social Security—have stagnated for lower-middle-class people, increasing by just 2% over 24 years to around $406,000.
But total resources reached about $975,000 for the upper middle class, an increase of 26 percent. (For the richest group, the comparable figure was almost $3 million.)
Teresa Ghilarducci, an economist at the New School for Social Research whose studies were found similar results among middle-income Americans, highlighted one of the reasons for the growing disparity. “The house became a reservoir of debt,” she said. “Financial institutions figured out how to extract wealth from homes through refinancing and second mortgages, and they became more sophisticated.”
For most middle-income people nearing retirement, she said, the primary source of wealth is not home equity or retirement savings. These are Social Security benefits.
One particularly stressed subset: older workers in physically demanding jobs. A report from the Working Group on Retirement Security for Older Workers, recently convened by the National Academy of Social Insurance it is estimated that at least 10 million workers those over 50 belong to this category.
These jobs include “a lot of service-related work that requires you to be on your feet all day,” said Joel Eskovitz, a task force member and AARP policy director. “Retail people, home health aides, janitors. And many jobs related to Amazon and other tech companies – warehouse work, deliveries. Workers in these jobs are disproportionately Black, Hispanic and Asian.
Because “these are not jobs you can keep into your 60s,” Mr. Eskovitz said, these workers often claim their Social Security retirement benefits earlier, at age 62. This results in “a significant reduction in monthly benefits.” and lifetime income” compared to waiting until full retirement age, currently set at 67 for most beneficiaries.
The gap between the two middle classes is also reflected in health measures. Among the lower middle class, “there is almost no decline in smoking,” Mr. Chapel said. “But the upper middle reduced smoking by about half.”
Low-income people suffer more from chronic health problems and are much more likely to describe their health as fair or poor. (One exception: Obesity increased dramatically for both income groups.)
This also results in differences in life expectancy. “Everyone is living longer, but the upper middle class is enjoying it much more, and a higher proportion of their remaining years are quality years” without serious health problems, Mr. Chapel said.
Between 1994 and 2018, life expectancy at age 60 increased twice as much for upper-middle-class men and women as for those in the lower-middle classes.
Even those whose slightly higher incomes technically place them in the upper middle class can feel insecure. “I just pray that I can keep my job at least until I’m 65,” Patricia Thompson, 62, wrote in a Facebook post.
She and her husband live in Hickory, North Carolina, where she earns $53,000 a year as an acquisitions editor for a small press and where her husband, 71 and retired, receives a Social Security payment of 1 $500 and withdraws $500 from his retirement savings each month. That’s above the 45th percentile of total household income for a married couple.
But they continue to pay a mortgage and a car loan, and “I have no pension,” Ms. Thompson wrote. “I barely have any savings because of the student loans I took out late in life. Where is the safety net for people like me?
“It’s really a huge policy challenge to figure out how to ensure that different groups can live with dignity in retirement,” Mr. Eskovitz said.
Amid debate over raising the Social Security retirement age, policymakers and advocates have suggested a certain number of measures strengthen the financial stability of low-income people and those who are prematurely excluded from the labor market.
The Working Group on Retirement Security for Older Workers generated a long list of suggestions, including a “bridge benefit” for workers in physically strenuous jobs, allowing them to receive partial Social Security payments sooner without lock them into reduced benefits for the rest of their lives.
Raising the ceiling on income subject to social security contributions could improve the solvency of Social Security for all.
Mr. Chapel highlighted a new Department of Labor program called RETAINwhich helps sick or injured workers return to work and includes workplace accommodations, rehabilitation and retraining.
Ms. Louvigny thinks that everything will be fine for her, provided that she can continue to work for a few more years and that she remains prudent in her spending. “I try not to worry,” she said. “I don’t allow these thoughts.”