Estimates suggest that older adults have some of the lowest poverty rates in Canada, but those rates vary depending on what you consider.

The market basket measure (MBM) calculates the cost of a basic set of goods and services and is the benchmark for the official poverty line. In 2023, it said five per cent of adults 65 and older were living in poverty.

The low-income measure (LIM), which assesses financial standing relative to the broader population, suggests that the share of older adults who are struggling is likely to be much higher. Some 14 per cent had incomes below the LIM threshold in 2023.

A 2024 survey by the National Institute on Ageing (NIA) also indicates the true scale of financial hardship among seniors is far greater when using the material deprivation index (MDI). Using this measure, 14 per cent of people 65 and older had a poverty-standard of living—more than twice the federal government’s official rate.

These differences make one thing clear: no single method fully captures seniors’ financial realities. A more complete understanding of the economic hardships faced by our aging population requires a multi-faceted approach.

A comprehensive approach

Poverty among older adults must be understood in a way that reflects both income constraints and actual living conditions. Policymakers would benefit from using a combination of income measures, such as the MBM and LIM, along with measures like the MDI, which assesses whether people can maintain a decent quality of life. Together, these tools provide a more complete, accurate picture of seniors’ income adequacy.

The market basket and low-income measures assess financial well-being based on a household’s earnings. The former estimates income needed for a modest standard of living. The latter, a relative measure, highlights economic inequality by identifying households earning less than 50 per cent of the national median income. Both metrics miss a critical dimension — how income translates into real-world living conditions.

Considering material deprivation shifts the focus from earnings to day-to-day experience. It measures whether households can afford goods and services that most would view necessary for an acceptable standard of living. The distinction is crucial for older adults, whose monetary security is affected by rising health-care costs, housing expenses and life transitions such as retirement or losing a spouse. All can lead to new debt, financial strain and a greater need for money management.

Income-based measures assess the amount of money a household has, but do not reveal whether that translates into adequate material conditions. The MDI helps fill that gap by considering actual circumstances and whether individuals can afford essentials, including housing, food and necessary services such as health care.

A 2023 Maytree report called for the low-income measure to be used alongside the market basket until a new measure can be developed for a more accurate account of seniors’ economic circumstances. But a better assessment must also consider material deprivation. Policymakers should rely on all three metrics for a full picture of financial hardship in later life.

Why the MBM and LIM should be used together

The market basket suggests that older adults are less likely to be struggling financially and have lower poverty rates than the general population. But the low-income calculation presents a different picture. Based on the LIM, older adults are more likely to have lower incomes than the general population. Since 2015, LIM-based estimates on the proportion of older Canadians living with low incomes has been, at minimum, twice as high as estimates based on the market basket.

Research using low income as a measure shows that poverty rates among older adults in Canada have been rising, driven by growing income inequality among older adults as well as between older adults and the working-age population.

Rising income inequality affecting seniors should be a pressing concern for policymakers. The significant gap between the income-based MBM and LIM rates suggests that while many older adults may not technically fall below the market basket poverty threshold, they are still struggling financially compared with the broader population. This means a growing segment of Canadians has limited resources to manage rising costs in housing, health care and daily living.

There are a number of limitations with the market basket that likely contribute to it underestimating poverty among seniors. For one, it was designed around the needs of a family of four and does not accurately reflect the higher living costs or financial needs of older adults. It also fails to account for out-of-pocket health-care costs, which can be much more significant later in life, and the financial vulnerability of single-person households, common among older adults.

That’s why the low-income measure should be used in tandem. The market basket establishes a fixed poverty threshold, while the LIM highlights economic disadvantage compared with the broader population. Both are essential for understanding the financial realities of Canada’s aging population.

Why the MDI Is essential in measuring poverty among older adults

Income-based measures do not capture whether finances are  enough to translate into a decent standard of living. The material deprivation index offers a clearer picture of financial hardship by measuring what people can’t afford, rather than how much money they have.

Developed by researchers at Food Banks Canada, the MDI identifies 11 goods, services and activities that are widely seen as necessary for an acceptable standard of living. Households unable to afford two or more of these items are considered to be at a poverty level.

This acknowledges that households with the same income can have vastly different living conditions. Unexpected expenses, personal debt, health-related costs or having to support family members can all affect whether someone is able to maintain a minimal decent standard of living. These are factors that income alone cannot reflect.

The National Institute on Ageing’s finding that 14 per cent of seniors experience material deprivation—more than twice the market basket poverty rate — reinforces the need for a broader lens when assessing hardship among older adults.

A focus on material deprivation can also help to account for the diversity of financial circumstances among older adults. An older person with a low income, but who lives in subsidized housing, may have an adequate standard of living. Conversely, a senior with a higher income but significant debt brought on by medical expenses may be struggling. Looking at income alone, without considering material conditions, risks misidentifying who is truly vulnerable.

A multidimensional approach

Taken together, the three measures offer a more complete picture of financial security in later life. The market basket defines a poverty threshold, the low-income measure highlights economic disparity and the material deprivation index captures the everyday reality of financial hardship. Without the latter, policymakers risk overlooking older adults whose incomes don’t reflect expenses which can affect their standard of living.

The findings from the institute’s 2024 survey make clear that a material deprivation lens is essential to fully understanding seniors’ financial realities. All three measure must be used to develop policies that accurately reflect the financial needs of the fastest-growing demographic in Canada.