Meet the 'forgotten middle' of Americans over 75 about to face a rocky retirement

• A financial crunch is expected as a new American generation approaches retirement.
• Middle-income Americans, particularly Black and Hispanic adults, may struggle financially in retirement.
• The 'Forgotten Middle' group might face difficulties affording necessary housing and care.

A crisis is ballooning for middle Americans of retirement age.

A new analysis from research organization NORC at the University of Chicago, which used data from the Health and Retirement Study at the University of Michigan, specifically looked at older adults in the middle-income range, whom researchers dubbed the “Forgotten Middle.”

They focused on the potentially bleak financial futures of what they term the "Forgotten Middle." The "Forgotten Middle" group consists of Americans who are 75 or older, have an income or assets that would provide the equivalent of $26,000 to $103,000 a year in 2020 dollars, and don’t qualify for Medicaid.

"A majority of middle-income older adults will be unlikely to afford needed care and housing in the next decade, potentially challenging their ability to age with dignity, choice, and independence," the researchers found.

That “Forgotten Middle” group is only expected to get bigger and more diverse. NORC now found that, from 2020 to 2035, adults of color will rise from 12% to almost 25% of that older, middle-income cohort.

And that group likely isn’t financially set for key retirement expenses.

“The closer look at the financial resources across racial and ethnic groups in the Forgotten Middle has found that many middle-income older adults, particularly Black and Hispanic older adults, are unlikely to afford needed care and housing options in the next decade, potentially challenging their ability to age with dignity, choice, and independence,” Sarah Rayel, senior director of the healthcare strategy department at NORC at the University of Chicago, wrote in a statement to Business Insider. 

For instance, Black and Hispanic middle-income adults are overrepresented in the bottom quartile of financial resources. By 2035, they’re projected to make up, respectively, 12% and 18% of that bottom quartile.

Comparatively, Black and Hispanic Americans are expected to make up just 6% and 7% of the top quartile, respectively, while white Americans will make up 82%. 

Per NORC’s analysis, Black and Hispanic adults in this group tend to hold fewer liquid assets like stocks or retirement accounts than their white counterparts. Liquid assets — or lack thereof — can be key for retirees, since it means they can cash out and afford necessary expenses should it come to it, per the analysis.

“Our research found that home ownership for Black older adults is anticipated to fall substantially by 2035, driven by the 75-84 age group. This could limit opportunities for aging in place,” Rayel said. 

A University of Southern California and Columbia University analysis found that homeownership rates for lower-income “Forgotten Middle” Americans have fallen by 31% from 1994 to 2018. Similarly, the lower-income group has also seen their rate of having any type of health insurance plummet. During that same period, their annual resources have fallen 18%, compared to a rise of 15% for upper-middle income adults.

And it’s not just the looming threat of falling homeownership that’s hanging over retirees' heads: There’s a retirement saving crisis brewing, with many Americans who are rapidly approaching — or already at — quitting time not holding any retirement accounts.

According to the Federal Reserve's 2022 Survey of Consumer Finances, the median family in the top 10 percent of the income distribution that has a retirement account held $558,600 in retirement accounts, while the median family overall with a retirement account held $86,900 in such accounts. The median family in the bottom 20% of the income distribution that had a retirement account had a median of $18,000 in those holdings.

That might prove costly for both governments and the retirees who are struggling: A 2023 Pew Charitable Trusts study found that, from 2021 to 2040, the share of households with someone over the age of 65 who is financially vulnerable — meaning they have less than $75,000 in yearly retirement income — will go up by 43%. And, in aggregate, that'll result in a $1.3 trillion public assistance hit to state and federal governments. The National Council on Aging also found that 80% of households that have older adults are either already financially struggling or "are at risk of falling into economic insecurity as they age."

One potential bipartisan legislative solution, which has the backing of the AARP, is to automatically set up retirement savings accounts for Americans who wouldn't otherwise get one at work.

"Americans who work hard their entire lives deserve to retire with dignity," Sen. John Hickenlooper, a Democrat from Colorado, said in a press release on the Retirement Savings for Americans Act. "This bill helps low-income workers enjoy a secure retirement and fulfill their American dream.''

Are you nearing or in retirement and worried you won’t be able to afford it? Contact this reporter at [email protected].