There is considerable evidence that older adults with fewer socioeconomic resources have worse health (Korda, Paige, Yiengprugsawan, Latz, & Friel, 2014). This includes a higher risk of multiple chronic conditions (Orueta & Nuño-Solinís, 2013), greater functional impairment (McMunn, Nazroo, & Breeze, 2009), and worse disability at the same level of co-morbidity (Barbareschi, Sanderman, Kempen, & Ranchor, 2009). There are a number of pathways by which socioeconomic resources are likely to influence health (House, Lantz, & Herd, 2005; Taylor, 2010). Higher income is associated with better education, which in turn is associated with improved behavioural health. Financial resources are also important in themselves, particularly for slowing the increase in disability after onset.
The link between income and happiness is less clear than the link between income and health. Overall, the evidence suggests that older adults with higher income or socioeconomic status also tend to report better subjective wellbeing or quality of life (Knesebeck, Wahrendorf, Hyde, & Siegrist, 2007; Pinquart & Sorensen, 2000), including in Ireland (Barrett et al., 2011). The effect of income on wellbeing tends to be strongly influenced by relativities - people tend to compare themselves with a particular reference group and be less satisfied with increases in income if others in their reference group receive a similar increase (Dorn, Fischer, Kirchgässner, & Sousa-Poza, 2007; Ferrer-i-Carbonell, 2005). In addition, extreme poverty or unemployment may be associated with markedly lower well-being (Argyle, 1999; Layte et al., 2013).
It is likely that wellbeing is not influenced by income on its own – rather, higher income is associated with a range of positive outcomes that in turn affect wellbeing. For example, research with TILDA found social class, assets and income made no difference to quality of life once the effects of health, social relationships and mental health were accounted for (Layte et al., 2013).
Income may become particularly important for wellbeing in adverse circumstances, such as poor physical health. For example, financial resources have been found to have a buffering effect on well-being against the detrimental effects of disability (D. M. Smith, Langa, Kabeto, & Ubel, 2011). This effect of wealth was strongest relatively soon after a new disability, and was fading by 2 years after the reported onset. On the other hand, people with a higher income may have greater expectations and standards for their health, leading them to evaluate their health as worse given a similar health status as someone on a lower income (Delpierre et al., 2012).
There are several challenges associated with income-based measures of poverty and deprivation among older people specifically. Relative income-based measures of poverty rely on arbitrary divisions between poor and non-poor, particularly where the poverty line is located in a dense part of the income distribution. Material deprivation measures capture whether people can afford specific necessities. McKay (2008) noted that older people are less likely to disclose not being able to afford necessities but rather may report that they do not want them (McKay, 2008). Deprivation questions are not applicable to all groups in the population, or all age groups, life stages and circumstance and it is important to consider spending preferences and cognitive processes involved in answering questions about enforced lack of essential items (Berthoud, Blekesaune, & Hancock, 2006; Dominy & Kempson, 2006; Finch & Kemp, 2006).
Health status, receiving help from others, and assets and savings should also be taken into account when measuring material deprivation among older people (McKay, 2008). Ill health, disability and mobility influence both living standards and deprivation and the associated between health status poverty and deprivation can vary depending on social and family characteristics, for example between those who are widowed and cohabiting couples (Berthound et al. 2006). The health status of partners is also important for household resources. Low levels of deprivation among older people on low incomes may be attributed to financial and non-financial help from others in the form of durable items, holidays, furniture, transport (car), and help with utility bills and food (McKay, 2008). Such support is not limited to older people and it remains to be seen whether such support is a response to poverty or just represents a level of expected reciprocity and cultural norm of typical exchanges between family members and friends.
The life cycle view of saving suggests that savings reach a maximum for any individual around retirement and decline thereafter. Much empirical evidence on the finances of older people indicates that many older people continue to save despite being on low incomes which supports their ability to afford items (Finch and Kemp, 2006).