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Aging in poverty is tough

By Jennie L. Phipps · Bankrate.com
Sunday, May 6, 2012
Posted: 6 am ET

Aging in poverty is a very real possibility for many. According to statistics gathered by the U.S. Census Bureau in 2009, the poverty rate for all people older than 65 was 8.9 percent. For those age 85 or or older, it was 14.6 percent.

My husband has a mentally handicapped 64-year-old sister. We help her live on her own with a part-time job, some government assistance and -- recently -- a small annuity she inherited when her mother died.

Along the way, we've learned more than we want to know about eligibility for government programs. If this is territory into which you might tread as you face retirement, here are some basics worth knowing.

The federal government defines poverty as very low levels of income. In 2012, you are living at or below the poverty level if your income is $11,170 for a single person and $15,130 for a couple. All sorts of federal programs assisting those who have low incomes base eligibility on these numbers.

The first question you might ask is how income is defined and whether these numbers are before tax or after tax. The U.S. Department of Health and Human Services answers that question by saying, "There is no simple answer to these questions."

Let's hope this doesn't have to be part of your retirement planning, but if it is, you'll quickly learn there is no consistent way state and federal agencies define income. That can make it difficult for low-income seniors to manage their money and stay eligible for programs like extra help with Medicare, food stamps, housing assistance, the senior companion program and legal assistance for the poor.

In assisting my sister-in-law, we found that the system quickly cuts off anyone whose income rises above whatever the predetermined threshold is -- even if the money comes from a small life insurance policy or an inheritance left to them to make their old age easier. Until that money is spent, the low-income senior won't be eligible for the programs they depend on.

A good place to start learning about these issues is by running income numbers through the National Council on Aging's BenefitsCheckup.org. This online calculator considers local, state and federal programs and does a very good job of doing an initial screening and pointing applicants toward programs for which they are likely to qualify.

If your estate planning includes leaving money to help a low-income person. Get some legal advice from an attorney who is knowledgeable about special needs issues. Otherwise, your well-intentioned gift could make life harder rather than easier for the recipient.

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