Understanding California’s Middle-Income Older Adult Population

Couple looks at their phone and wife points.

Following two groundbreaking studies on the “Forgotten Middle,” NORC’s latest middle-market analysis focuses specifically on California’s middle-income seniors, finding that most will have trouble paying for housing and care in the next decade. Without home equity, nearly 90 percent of the state’s middle-income seniors aged 75 and older will not have the financial resources to pay for assisted living in 2033. Even if they sell their homes, half of them still will not be able to afford private assisted living if they need and want it.

NORC’s original “Forgotten Middle” study was published in 2019 and was the fifth most-read Health Affairs article that year. This first of its kind study examined how the number, demographics, health status, and financial resources of middle-income seniors would change in the coming decade. In 2022, NORC produced an updated analysis using more recent Health & Retirement Survey (HRS) data from 2018 to reassess the financial circumstances, health needs, and care costs that middle-income seniors in the U.S. would face in 2033.

Although the publicly available HRS data do not include state-identifiers, NORC analyzed California’s seniors by reweighting the 2018 HRS data to reflect a California-only sample. Supported by The SCAN Foundation and West Health, this project revealed several findings:

California is estimated to have 1.6 million middle-income seniors aged 75 and above in 2033. Between 2018 and 2033, the number of middle-income seniors aged 85 and above is expected to double.
California will be more diverse in 2033, with nearly half the middle-income senior population (47 percent) being people of color.
A majority of California’s middle-income seniors will have mobility limitations and three or more chronic conditions.
Without selling their homes, 89 percent of California’s middle-income seniors will not be able to afford assisted living rent.

Methodology

This analysis relies on the Health and Retirement Study (HRS), using 2018 as a base year. Researchers at NORC examined individuals who were age 60 and older in 2018 since they will be age 75 or older in 2033. For each of these individuals in the sample, the researchers modeled the probability of living to 2033 for inclusion in the future senior cohort.

The researchers then examined the time-invariate demographic attributes of this group, such as gender, race, and education. They estimated people’s health, cognitive function, and mobility status assuming the same rates of these conditions that exist in the 2018 population, for each demographic subgroup.

The researchers also modeled these individuals’ future financial resources, starting from their actual income and assets in 2018. They grew these assets based on the historical rate of change for each type of financial resource, and annuitized assets across individual’s life expectancy.

NORC researchers then recalibrated the nationally representative forecast of the 2033 middle-market population and their financial resources to produce estimates representative of future Californians. The re-weighting process utilized benchmarks derived from the American Community Survey (ACS), California Health Interview Survey (CHIS), and the National Study of Long-Term Care Providers to generate California estimates. The benchmarks selected for reweighting included: sex, race, age category, education, partnered status, children living in residence, working status, income, assisted living or nursing home residency, self-reported health status, high blood pressure, diabetes, and smoking status.

The researchers analyzed financial resources at an individual level instead of a household basis, as is common. By characterizing resources at an individual level, the research is better able to account for differences in life expectancy and health needs of spouses. This also enables us to compare resources against annual housing and care costs.

In addition to analyzing California’s middle-market using Forgotten Middle income thresholds (214% FPL to 832% FPL), researchers also examined California’s “near dual” population (139% FPL to 400% FPL). This allowed NORC to better assess the demographics and health needs of the population at risk of spending down to Medicaid eligibility.

The analysis’ measure of financial resources includes income streams (i.e., Social Security) and annuitized assets (i.e., retirement savings or mutual funds). For some seniors, adult children may make financial contributions to support their senior housing and care, though this analysis does not assume any financial support from adult children. The researchers include information about housing equity but hold this separately as some individuals may be reluctant to sell their home or may have a spouse who continues to live in the home. Additionally, some seniors may want to retain their home as a “nest egg” to protect against outliving their assets or having a catastrophic health event.