Inflation and the Elderly: A Housing Perspective

Abstract

Inflation causes special problems for the elderly, a group with special characteristics that make it more difficult for them to cope: they have a less flexible mind set; different expenditure patterns; their income drops by half upon retirement; and the period of retirement is lengthening very significantly and rapidly. As a result, a real possibility of intergenerational conflict is being created. Inflation is especially damaging for those on fixed incomes; at current rates of inflation, erosion of pensions compels the doubling of income in a decade just to keep even; future prospects work against any improvement and toward a steady decline in effective elderly income for the rest of the century. Some solutions suggested include later retirement, unified portable indexed pension plans, reverse annuity mortgages, better use of the housing stock, revision of the tax code to slow down condominium conversions, and finally, behavioral changes to cope with energy and other higher cost demands.