According to a recent Employee Benefit Research Institute study, the proportion of retirees living below the poverty line has been growing steadily since 2005.  Poverty rates for people ages 65 to 74 climbed from 7.9 percent in 2005 to 9.4 percent in 2009.  The increase was even steeper for older retirees, jumping from 7.6% to 10.7% for those between ages 75 and 84.  For the oldest retirees, the picture is even grimmer.  Over 14% were living in poverty in 2009.

One of the biggest drivers of poverty in old age is failing health and the associated medical costs.  Almost all senior citizens living in poverty (96 percent) have some sort of health condition, such as high blood pressure, diabetes, or arthritis.  Over 70% have dealt with acute health conditions such as cancer, lung disease, heart problems, or stroke.  And the odds of developing health problems increases significantly with age.

Sudipto Banerjee, a research associate at EBRI, points out that “medical expenses have been rising over the past decade very rapidly.  A lot of people have to move to nursing homes, and nursing homes are very expensive.”

The recession has also been a factor.  Many people were forced to sell assets in their personal investment portfolio at depressed prices in order to support their retirement spending.  Banerjee noted that rising poverty rates also rose during the previous two recessions.  While poverty rates could improve once the recession subsides, it’s difficult to make up portfolio losses in a shrinking portfolio as one ages.  So once a senior falls below the line, getting back above it can be a challenge.

Even more interesting is the finding that poverty rates for women were nearly double that of men in almost all years between 2001 and 2009 (13% vs. 7%).  Single men and women also have significantly higher poverty rates than married couples.

What can you do to protect against the risk of falling into poverty in your post-retirement life?  First, be sure to create a retirement plan identifying your post-retirement goals and the costs associated with them.   The plan should address your long term care risks, either via insurance or through other sources of funding & support.  Manage your investment portfolio as conservatively as possible in order to achieve the level of return required to fund your goals.  Last, and most important, review the plan frequently and be prepared and be flexible to adjust your spending as conditions warrant.  These steps should dramatically improve the chances that you never cross that line.