Social Security Income in Poor or Nearly Poor Elderly Populations
The economic status of older adults in the United States today is greatly improved, and there is much diversity of circumstances among different elder populations. In 2004 inflation-adjusted dollars, the median income of elderly households had increased from $13,228 in 1960 to $24,509 in 2004. Since the mid-1950s, poverty, as measured in 2005 by the U.S. Census Bureau’s poverty thresholds, has decreased for all age groups but most noticeably for adults age 65 years and older. Among persons in this age group, poverty rates declined precipitously from 35.2% in 1959 to 14.6% in 1974 and continued to decline more slowly to 9.8% in 2004. To put this in context, in 2004 the poverty threshold was $9,060 for unrelated per- sons age 65 years and older and was $11,418 for couples with one person in that age group. But these data and trends provide only part of the income story.
For instance, a significant portion of today’s retirees live in near poverty with incomes between 100% and 125% of the poverty threshold. According to the Census Bureau, an additional 6.7% of persons over 65 years of age lived in near poverty in 2004. These near- poor elderly are very vulnerable to any measure of income loss or increase in expenses, and they are offered little economic protection from these unexpected losses outside of Social Security and Medicare.
Disaggregating the elderly further by race/ethnicity, gender, marital status, and advanced age provides greater insight into their economic well-being. In terms of absolute poverty rates, Black and Hispanic elders are more likely to be poor or near poor than are their White counterparts, nonmarried elders of all races and ethnicities are more likely to be poor or near poor than are married elderly couples, and nonmarried women of all races and ethnicities are more likely to be poor or near poor than are nonmarried men. For example, only 7.5% of White non-Hispanics had below poverty-level incomes in 2004, compared with 13.6% of non- Hispanic Asians, 23.9% of non-Hispanic Blacks, and 18.7% of similarly aged Hispanics of all races.
Similarly, among White non-Hispanics age 85 years and older, 7.5% of men and 15.3% of women have below poverty-level incomes, compared with 15.1% of similarly aged non-Hispanic Black men and an astounding 31.7% of non-Hispanic Black women, as noted by the Census Bureau in 2005. Similarly, whereas the median household income of persons 65 to 74 years of age was $30,854 in 2004, it was only $20,467 for those age 75 years and older. These racial, ethnic, age, and gender differences in poverty after retirement are tied specifically to the differences these groups experience in terms of earnings (linked to Social Security benefit amounts) during their working years and in terms of their likelihood to be employed in labor sectors that do not provide private pensions.
Social Security income, the most important source of cash income for the vast majority of older households, providing nearly 40% of elder household incomes, followed by income from earnings, accounting for one fourth of the income going to elder units. But more significantly, the second, third, fourth, fifth, and sixth show that the contributions of these income sources vary substantially by income quintile. More than 70% of the income going to the bottom 60% of the elder income distribution comes from Social Security. In turn, the impact of income from earnings, employer pension, and assets is greatest on the 20% of elder units that received more than $40,928 in 2004.
Similarly, when examining the different age groups in the over 65 years category, we discover that not all persons over 65 years of age receive their income from the same sources or receive the same amounts of income from those sources. For example, among those age 80 years and older, only 6% receive some income from earnings, employer pension, and assets compared with 45% of persons 65 to 69 years of age.
When breaking down the population over 65 years of age by gender or race/ethnicity, we discover similar discrepancies in economic reliance on public programs as income. As we see, minority elderly are less likely than White elderly to receive income from public or private pensions or from assets and are more likely to receive Social Security income and public assistance programs such as SSI. Hispanic elderly rely more on earnings from work and less on benefits other than Social Security than do their White and Black counterparts. These differences are also visible between the genders, with women relying more on Social Security income, assets, and public assistance, whereas men have access to more income from earnings and retirement benefits other than Social Security (i.e., private, public, or government employee pensions).
As we can see, although older Americans in general enjoy higher median incomes and lower poverty rates than ever before, there are marked differences among subgroups of this population. These differences leave unmarried women, minorities, and lower income workers much more vulnerable to poverty during their later years and much more vulnerable to detrimental effects of decreases in public protections such as Social Security, SSI, Medicare, and Medicaid. These differences pose challenges for current and future cohorts of the old.