Order Code RL32697
CRS Report for Congress
Income and Poverty Among
Older Americans in 2007
Updated October 3, 2008
Patrick Purcell
Specialist in Income Security
Domestic Social Policy Division
Congressional Research Service The Library of Congress Washington, DC 20540
Income and Poverty Among Older Americans in 2007
Summary
Older Americans are an economically diverse group. In 2007, the median
income of individuals aged 65 and older was $17,382 but incomes varied widely
around this average. One-fourth of Americans 65 or older had incomes of less than
$10,722 in 2007, while another one-fourth had incomes of $32,160 or more. As
Congress considers reforms to Social Security and the laws governing pensions and
retirement savings plans, it may be helpful to examine how changes to one income
source would affect each of the others, and thus the total income of older Americans
Older persons receive income from a variety of sources, including earnings,
pensions, personal savings, and public programs such as Social Security and
Supplemental Security Income. Using data from the March 2008 Current Population
Survey, this report describes the number of elderly individuals and households
receiving income from each of these sources and the distribution of income across
individuals and households.
Retirement benefits from Social Security and pensions are the most common
sources of income among the aged. In 2007, Social Security paid benefits to 86% of
individuals age 65 and older and to 89% of households in which the householder or
the householder’s spouse was 65 or older. Social Security is also the largest single
source of income among the aged. Sixty-nine percent of Social Security beneficiaries
aged 65 or older received more than half of their income from Social Security in
2007. For 41% of elderly recipients and 29% of elderly households, Social Security
accounted for more than 90% of total income in 2007. Just one-third of people age
65 and older, and fewer than one-half of elderly households, received income from
a private or public pension in 2007. Among individuals age 65 or older who reported
income from a government pension, median pension income was $16,629. Among
recipients of private pensions, the median pension received in 2007 was just $7,200.
Many Americans prepare for retirement by saving and investing some of their
income while they are working. Of the 36.8 million Americans age 65 and older who
were living in households in 2007, 18.9 million (51%) received income from assets,
such as interest, dividends, rent, and royalties. Most received small amounts of
income from the assets they owned. Of all individuals age 65 or older who received
income from assets in 2007, half received less than $1,585. Fifty-seven percent of
households with a householder or spouse age 65 or older received income from assets
in 2007. Among these households, median income from assets in 2007 was $2,254.
Earnings are an important source of income for older Americans, especially
those under age 70. Although there was a trend toward earlier retirement from about
1960 to 1985, over the past 20 years more Americans have continued to work at older
ages. In 2007, median earnings of individuals age 55 to 64 who worked were
$37,000, while the median earnings of workers age 65 to 69 were $25,000. Among
all workers 65 and older, median earnings in 2007 were $20,000. Poverty among
those age 65 and older has fallen from one in three older persons in 1960 to less than
one in ten today. Although the overall rate of poverty is relatively low, it remains
high for women, minorities, the less-educated, and people over age 80.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Median Individual and Household Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Sources of Income by Income Quartile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Median Individual and Household Income by
Demographic Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Income from Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Social Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Income from Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Earned Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Near-Poor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
List of Figures
Figure 1. Sources of Individual Income, Top Quartile, Age 65+ . . . . . . . . . . 7
Figure 2. Sources of Individual Income, Second Quartile, Age 65+ . . . . . . . 7
Figure 3. Sources of Individual Income, Third Quartile, Age 65+ . . . . . . . . . 8
Figure 4. Sources of Individual Income, Bottom Quartile, Age 65+ . . . . . . . 8
Figure 5. Sources of Household Income, Top Quartile, Age 65+ . . . . . . . . . . 9
Figure 6. Sources of Household Income, Second Quartile, Age 65+ . . . . . . . 9
Figure 7. Sources of Household Income, Third Quartile, Age 65+ . . . . . . . 10
Figure 8. Sources of Household Income, Bottom Quartile, Age 65+ . . . . . . 10
Figure 9. Median Individual Income by Demographic Traits, 2007 . . . . . . 12
Figure 10. Median Household Income by Demographic Traits of
Householder, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Figure 11. Social Security Income of Individuals Age 65+, 2007 . . . . . . . . . 15
Figure 12. Social Security Income oh Households Age 65+, 2007 . . . . . . . . 15
Figure 13. Individual Income from Pensions in 2007 . . . . . . . . . . . . . . . . . . 18
Figure 14. Household Income from Pensions in 2007 . . . . . . . . . . . . . . . . . . 18
Figure 15. Percentage of Households Age 65 and Older with
Income from Assets in 2007, by Total Household Income . . . . . . . . . . . 21
Figure 16. Percentage of Individuals Age 65 and Older with
Income from Assets in 2007, by Total Individual Income . . . . . . . . . . . 21
Figure 17. Employment Rates by Age and Sex, March 2008 . . . . . . . . . . . . 24
Figure 18. Earned Income, by Age, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 19. Percentage of Individuals Age 65 and Older in Poverty, 2007 . . 26
List of Tables
Table 1. Percentage of Older Individuals with Income in 2007,
Mean and Median Amounts, by Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Percentage of Older Households with Income in 2007,
Mean and Median Amounts, by Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. Social Security as a Percentage of Individual Income among
Recipients Aged 65 and Older in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table 4. Social Security as a Percentage of Household Income among
Recipient Households Aged 65 and Older in 2007 . . . . . . . . . . . . . . . . . . . 14
Table 5. Income from Assets, Individuals 65 and Older, 2007 . . . . . . . . . . . . . . 22
Table 6. Income from Assets, Households 65 and Older, 2007 . . . . . . . . . . . . . 22
Income and Poverty Among
Older Americans in 2007
Introduction
This report describes the income and poverty status of the 36.8 million
Americans age 65 and older who were living in households in 2007.1 Older persons
receive income from a variety of sources, including earnings, pensions, personal
savings, and public programs such as Social Security and Supplemental Security
Income. The substantial variation in the number of people receiving income from
each source and the amounts they receive from each source are the main topics of this
report. Using data from the March 2008 Current Population Survey, this report
describes the number of elderly individuals and households receiving income from
earnings, pensions, Social Security, assets, veterans’ benefits, public assistance, and
other sources. It also describes how the proportion of total income received from
each source differs between high-income individuals and households and low-income
individuals and households.
In addition to looking at sources and amounts of income, the report examines
the income of the elderly relative to the federal poverty thresholds. In 2007, 9.7% of
Americans 65 and older had family incomes below the federal poverty thresholds of
$9,944 for a single person and $12,550 for a couple. The 2007 poverty rate for
Americans 65 and older was lower than both the poverty rate for the population 18
to 64 years old (10.9%) and the poverty rate among children under age 18 (18.0%).2
Although income is an important measure of a person’s economic well-being,
it is not the only such measure, nor is it always the best one. Individuals with the
same cash income may have significantly different levels of financial assets or other
forms of wealth. Some own their own homes while others rent. Some receive non-
cash benefits from their former employers, such as fully or partially paid health
insurance, while others have to pay for health services or insurance out-of-pocket.
The federal and state governments also provide many non-cash benefits and services
such as Medicaid, Food Stamps, and the Low-Income Home Energy Assistance
Program that improve the financial circumstances of lower-income families, but
which do not show up in measures of cash income. Finally, some older Americans
live with family members or receive considerable non-financial assistance from their
families, while others live alone and pay someone to perform household chores or to
provide personal care services. Even with these limitations, however, the amount of
income that older Americans receive is an important measure of their ability to
purchase the goods and services that contribute to their economic well-being.
1 This number does not include approximately 1.6 million elderly who live in nursing homes.
2 U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United
States, 2007; P60-235, Table 3, p. 13, [http://www.census.gov/prod/2008pubs/p60-235.pdf].
CRS-2
The Data
The findings in this report are based on data collected in the March 2008
Current Population Survey (CPS), conducted by the Bureau of the Census. The
March 2008 CPS consisted of interviews with approximately 75,900 households,
comprising a representative sample of the civilian, non-institutionalized population
of the United States. Each March, the survey includes detailed questions on sources
and amounts of income received during the previous calendar year. The CPS is
widely used by researchers in government, academia, and the private sector, and it
is the source of the official statistics published annually by the Census Bureau on
median family income, the number of Americans living in poverty, and the number
of people without health insurance. Like any survey, the CPS is subject to error.
Sampling error occurs if the households selected to participate in the survey are not
representative of the population. Non-sampling error occurs if survey participants
provide inaccurate information or if their responses are incorrectly recorded.
Individual Income and Household Income
Income figures in this report are shown both for individual persons and for
households. Individuals are classified by the individual’s age. One-person
households are classified according to the age of the householder. Married-couple
households are classified by the age of the older of the householder or the
householder’s spouse. This differs from the Census Bureau’s methodology,
which classifies households by the age of the householder. The methodology
adopted by CRS has the advantage of including in the count of elderly households
all households in which either the householder or the householder’s spouse is 65
or older. The number of persons in poverty is based on the Census Bureau’s
poverty thresholds, the family’s income, and the number of persons in the family.3
Median Individual and Household Income
In 2007, 96.5% of individuals age 65 and older had income from one or more
sources. The median total income of these individuals was $17,382. (See Table 1.)
Of all households in which either the householder or the householder’s spouse (if
present) was 65 or older, 98.9% had income from one or more sources, and the
median income of these households was $29,730. (See Table 2.) In general, because
more than one member of a household may have income from one or more sources,
elderly households were more likely to have income from each source, and had
greater income from each source, than elderly individuals. For example, 34.7% of
households in which the householder or householder’s spouse was 65 or older had
income from earnings, and the median earnings of those households were $30,000.
In contrast, just 19.7% of individuals age 65 or older had income from earnings in
2007, and the median earned income of these individuals was $20,000. Because
most individuals age 65 and older receive Social Security, the proportion of elderly
households that had income from Social Security in 2007 was only slightly higher
3 Family income differs from household income in households in which more than one
family resides or in which a family resides with other unrelated individuals.
CRS-3
than the percentage of elderly individuals with Social Security income. Eighty-nine
percent of households in which the householder or householder’s spouse was 65 or
older had income from Social Security, as did 86% of individuals age 65 or older.
However, the median Social Security income of elderly households that received
Social Security was 26% greater than the Social Security income of individual
recipients. Median household Social Security income was $15,012, while median
individual Social Security income was $11,922.
Elderly households also were more likely than elderly individuals to have
received income from private pensions, public pensions, and assets. In 2007, 14.5%
of households in which the householder or householder’s spouse was 65 or older
received income from public-sector pensions, compared to 10.9% of individuals age
65 and older. Elderly households with public-sector pension income had median
pension income of $17,400, compared to $16,629 among elderly individuals with
public pension income. Thirty percent of households in which the householder or
householder’s spouse was 65 or older received income from private-sector pensions,
compared to 23% of individuals age 65 and older. Elderly households with private-
sector pension income had median pension income of $8,052, compared to $7,200
among elderly individuals with private pension income. Fifty-seven percent of elderly
households had income from assets (mainly interest, dividends, and rent) in 2007
compared to 53.5% of individuals age 65 and older. Among elderly households with
asset income, the median amount of asset income was $2,254, while among elderly
individuals with asset income, the median amount of asset income was $1,585.
Relatively few elderly individuals and households received income from
veterans’ benefits, public assistance, or other income sources in 2007. Just 3.8% of
elderly households and 2.7% of elderly individuals received income from veterans’
benefits, which consist mainly of veteran’s compensation for service-related
disabilities and veterans’ pensions for indigent elderly veterans. Among elderly
households that received income from veterans’ programs, the median amount
received in 2007 was $9,000, while among elderly individuals with income from
veterans’ benefits, the median amount received in 2007 was $8,400.
In 2007, 4.8% of elderly households and 3.3% of elderly individuals received
income from public assistance, which consists mainly of Supplemental Security
Income, Temporary Assistance for Needy Families, and state general assistance.
Among elderly households that received income from public assistance programs, the
median amount received in 2007 was $5,376, while among elderly individuals with
income from public assistance, the median amount received in 2007 was $4,776.
In 2007, 5.4% of elderly households and 3.2% of elderly individuals received
income from other sources, including unemployment compensation, workers’
compensation, and other unidentified sources. Among elderly households that
received income from these sources, the median amount received in 2007 was
$4,800, while among elderly individuals with income from other sources, the median
amount received in 2007 was $4,000.
CRS-4
Table 1. Percentage of Older Individuals with Income in 2007,
Mean and Median Amounts, by Source
Age
Total,
Total,
55+
55 to 64
65+
65 to 69
70 to 79
80+
Total individuals (in thousands)
70,092
33,302
36,790
11,165
15,776
9,849
Percentage reporting no income
5.0
6.5
3.5
3.7
3.6
3.3
Total income
Percentage with any income
95.0
93.5
96.5
96.3
96.4
96.7
M ean total income
$36,754
$46,223
$28,449
$35,823
$26,627
$23,033
M edian total income
$22,800
$33,000
$17,382
$21,841
$16,722
$15,648
Earnings
Percentage with earnings
42.8
68.4
19.7
35.1
17.3
6.0
M ean earnings
$46,088
$49,422
$35,591
$39,485
$29,849
$36,225
M edian earnings
$33,000
$37,000
$20,000
$25,000
$15,600
$18,200
Social Security
Percentage with Social Security
53.0
16.8
85.8
78.1
88.5
90.1
M ean Social Security
$12,014
$11,425
$12,119
$12,273
$11,934
$12,260
M edian Social Security
$11,802
$10,722
$11,922
$11,922
$11,802
$11,922
Public pensions
Percentage with public pensions
8.7
6.4
10.9
10.9
11.0
10.6
M ean public pension
$23,531
$26,445
$21,991
$25,231
$21,904
$18,358
M edian public pension
$18,000
$22,000
$16,629
$19,200
$17,000
$14,400
Private pensions or annuities
Percentage with private pensions
15.9
8.3
22.8
19.6
23.7
24.8
M ean private pension
$12,809
$16,475
$11,605
$14,137
$11,088
$10,135
M edian private pension
$8,388
$12,000
$7,200
$9,500
$7,200
$6,288
Income from assets
Percentage with asset income
52.4
53.5
51.3
52.3
51.8
49.7
M ean asset income
$7,366
$6,413
$8,265
$9,120
$8,128
$7,473
M edian asset income
$1,301
$1,011
$1,585
$1,601
$1,800
$1,375
Veterans’ benefits
Percentage with veterans’ benefits
2.5
2.4
2.7
2.1
2.2
4.1
M ean veterans’ benefit
$11,880
$12,579
$11,322
$11,558
$12,494
$10,160
M edian veterans’ benefit
$8,532
$8,544
$8,400
$8,532
$10,248
$6,480
Public assistancea
Percentage with public assistance
3.2
3.2
3.3
3.3
3.0
3.5
M ean public assistance
$6,174
$7,105
$5,335
$5,650
$5,108
$5,311
M edian public assistance
$6,120
$7,440
$4,776
$4,800
$4,416
$4,800
Other incomeb
Percentage with other income
4.2
5.4
3.2
3.5
3.2
2.8
M ean other income
$8,421
$8,319
$8,576
$9,010
$8,255
$8,550
M edian other income
$4,344
$4,400
$4,000
$3,588
$3,984
$4,800
Source: Congressional Research Service (CRS) analysis of the M arch 2008 Current Population Survey.
a. Includes Supplemental Security Income, Temporary Assistance for Needy Families, and state general assistance.
b. Includes unemployment compensation, workers’ compensation, and income from unidentified sources.
CRS-5
Table 2. Percentage of Older Households with Income in 2007,
Mean and Median Amounts, by Source
Age
Total,
Total,
55+
55 to 64
65+
65 to 69
70 to 79
80+
Total households (in thousands)
46,185
20,702
25,483
7,164
10,847
7,472
Percentage reporting no income
1.2
1.2
1.1
1.1
1.1
1.1
Total income
Percentage with any income
98.8
98.8
98.9
98.9
98.9
98.9
M ean total income
$61,393
$79,521
$46,682
$62,193
$45,365
$33,719
M edian total income
$40,689
$60,491
$29,730
$42,214
$30,522
$21,928
Earnings
Percentage with earnings
56.4
83.1
34.7
56.2
33.7
15.4
M ean earnings
$66,262
$76,455
$46,417
$54,967
$39,135
$39,679
M edian earnings
$49,000
$60,000
$30,000
$38,000
$25,000
$24,513
Social Security
Percentage with Social Security
59.0
22.4
88.8
80.4
91.5
92.9
M ean Social Security
$16,017
$13,513
$16,530
$16,362
$17,265
$15,619
M edian Social Security
$14,400
$12,072
$15,012
$15,282
$15,600
$14,022
Public pensions
Percentage with public pensions
12.0
8.8
14.5
14.5
15.5
13.2
M ean public pension
$25,778
$29,260
$24,054
$27,139
$24,704
$19,706
M edian public pension
$19,960
$24,000
$17,400
$19,800
$19,200
$14,400
Private pensions or annuities
Percentage with private pensions
22.1
12.1
30.2
27.1
32.1
30.7
M ean private pension
$13,895
$17,362
$12,771
$15,461
$12,520
$10,877
M edian private pension
$8,940
$12,000
$8,052
$10,000
$8,272
$6,900
Income from assets
Percentage with asset income
57.8
59.0
56.8
57.0
57.4
55.8
M ean asset income
$10,639
$9,184
$11,869
$13,970
$11,826
$9,871
M edian asset income
$2,000
$1,600
$2,254
$2,400
$2,490
$1,928
Veterans’ benefits
Percentage with veterans’ benefits
3.8
3.7
3.8
3.5
3.3
5.0
M ean veterans’ benefit
$12,147
$12,866
$11,579
$11,238
$12,583
$10,841
M edian veterans’ benefit
$8,544
$8,400
$9,000
$7,200
$10,248
$7,740
Public assistancea
Percentage with public assistance
5.1
5.6
4.8
4.9
4.9
4.5
M ean public assistance
$6,748
$7,362
$6,163
$6,452
$5,984
$6,144
M edian public assistance
$6,600
$7,284
$5,376
$5,400
$4,800
$6,000
Other incomeb
Percentage with other income
7.4
9.9
5.4
6.6
5.3
4.5
M ean other income
$8,346
$7,810
$9,144
$9,437
$8,714
$9,467
M edian other income
$4,480
$4,344
$4,800
$4,140
$4,200
$6,000
Source: Congressional Research Service (CRS) analysis of the M arch 2008 Current Population Survey.
Note: Households are grouped according to the age of the older of the householder or householder’s spouse.
a. Includes Supplemental Security Income, Temporary Assistance for Needy Families, and state general assistance.
b. Includes unemployment compensation, workers’ compensation, and income from unidentified sources.
CRS-6
Sources of Income by Income Quartile
Figures 1 through 4 show the percentage of total income from each source
received by all individuals age 65 and older with any income in 2007. For example,
Figure 1 shows that among individuals with total income in the highest 25% among
all persons age 65 and older — those with 2007 income of more than $32,160 —
37% of total income came from earnings, 21% of income came from pensions, 21%
of income came from assets, 19% of income came from Social Security, less than 1%
of income came from public assistance, and 2% came from other sources. Thus,
among elderly individuals in the highest income quartile, 79% of total income came
from earnings, pensions, and assets.
In contrast, among elderly individuals whose income in 2007 was in the lowest
income quartile for people 65 and older — those with income of less than $10,722
— 2% of all income came from earnings, 3% of income came from pensions, 4% of
income came from assets, 84% of income came from Social Security, 6% came from
public assistance, and 1% came from other sources. (See Figure 4.) Among
individuals in the lowest income quartile, just 9% of total income came from
earnings, pensions, and assets. Figure 2 and Figure 3 show that Social Security
comprised 55% and 83%, respectively, of income received by individuals age 65 and
older in the second and third income quartiles in 2007.
Figures 5 through 8 show the percentage of total income from each source
received by all elderly households with any income in 2007. For example, Figure
5 shows that among elderly households with total income in the highest 25% among
all households in which either the householder or householder’s spouse was 65 or
older — those with 2007 income of more than $56,973 — 47% of all income came
from earnings, 15% of income came from pensions, 20% of income came from
assets, 16% of income came from Social Security, less than 1% of income came from
public assistance, and 2% came from other sources. Thus, among elderly
households in the highest income quartile, 82% of total income came from earnings,
pensions, and assets.
In contrast, among elderly households whose income in 2007 was in the lowest
income quartile for households in which the householder or spouse was 65 or older
— those with income of less than $16,244 — 3% of all income came from earnings,
5% of income came from pensions, 3% of income came from assets, 84% of income
came from Social Security, 4% came from public assistance, and 1% came from
other sources. (See Figure 8.) Among households in the lowest income quartile, just
11% of total income came from earnings, pensions, and assets. Figure 6 and Figure
7 show that Social Security comprised 43% and 67%, respectively, of income
received by elderly households in the second and third income quartiles in 2007.
CRS-7
Figure 1. Sources of Individual Income, Top Quartile, Age 65+
Figure 2. Sources of Individual Income, Second Quartile, Age 65+
Source: Both figures from CRS analysis of the M arch 2008 Current Population Survey.
CRS-8
Figure 3. Sources of Individual Income, Third Quartile, Age 65+
Figure 4. Sources of Individual Income, Bottom Quartile, Age 65+
Source: Both figures from CRS analysis of the M arch 2008 Current Population Survey.
CRS-9
Figure 5. Sources of Household Income, Top Quartile, Age 65+
Figure 6. Sources of Household Income, Second Quartile, Age 65+
Source: Both figures from CRS analysis of the M arch 2008 Current Population Survey.
CRS-10
Figure 7. Sources of Household Income, Third Quartile, Age 65+
Figure 8. Sources of Household Income, Bottom Quartile, Age 65+
Source: Both figures from CRS analysis of the M arch 2008 Current Population Survey.
CRS-11
Median Individual and Household Income by Demographic
Characteristics
Income received by the elderly varies significantly by age, sex, race, education
and marital status. Figure 9 shows that in 2007, individuals between the ages of 65
and 69 had a median income of $21,841 while those who were 80 or older had a
median income of $15,648. Men 65 and older had a median income of $24,142, while
women 65 and older had a median income of $13,877. The median income of older
African Americans, $13,104, was 71% of the median income of older white
Americans — $18,537. The median income of older Americans increases
substantially with their educational level. Those without high-school diplomas had
a median income of $12,200 in 2007, while college graduates had a median income
of $34,593. The median income of married individuals age 65 and older — $18,448
— was $2,026 higher than the median income of single individuals age 65 and older.
Figure 10 shows the median income of households in which either the
householder or the householder’s spouse was age 65 or older.4 In 2007, the median
income of households in which the householder was between the ages of 65 and 69
was $43,159. Households in which the householder was 80 or older had a median
income of $20,995. Elderly households with a male householder had a median
income of $38,222, while households with a female householder had a median income
of $23,400. The median income of elderly households in which the householder was
African American was $21,184, just 68% of the median income of elderly households
with a white householder. Elderly households in which the householder did not have
a high-school diploma had a median income of $18,230 in 2007, while elderly
households headed by a college graduate had a median income of $57,940. The
median income of married-couple households with a householder or spouse age 65 or
older was $45,036 in 2007, more than twice the median income of elderly households
in which the householder was not married ($19,722).
4 In Figure 10, the demographic traits are those of the individual who was designated as the
householder on the CPS.
CRS-12
Figure 9. Median Individual Income by Demographic Traits, 2007
Figure 10. Median Household Income by Demographic Traits of
Householder, 2007
Source: Both figures from CRS analysis of the M arch 2008 Current Population Survey.
CRS-13
Income from Retirement Benefits
Social Security
Retirement benefits from Social Security are the most common source of income
among Americans age 65 and older. In 2007, Social Security paid benefits to 86% of
individuals age 65 and older, and to 89% of households in which the householder or
householder’s spouse was 65 or older. Social Security is the largest single source of
income among the aged. In 2007, 68.5% of Social Security beneficiaries age 65 or
older received more than half of their income from Social Security and 59.3% of
elderly households that received Social Security benefits received more than half of
their total household income from Social Security. (See Table 3 and Table 4.)
For 40.6% of elderly individual recipients, Social Security accounted for more
than 90% of their income in 2007. Among elderly households receiving Social
Security, 29% received 90% or more of their total household income from Social
Security. While Social Security is an important source of income for a majority of the
elderly, the benefit amounts paid by Social Security are relatively small compared
with many recipients’ pre-retirement incomes. According to the Social Security
Administration, Social Security retired worker benefits replace approximately 55%
of the earnings of a career-long low-wage earner, 41% of the earnings of a career-long
average-wage earner, and 27% of the earnings of a career-long high-wage earner.
Average monthly Social Security benefits in 2008 are $1,079 for a retired worker
and $1,761 for an elderly couple. As Figure 11 shows, 37% of all individual
beneficiaries received less than $10,000 from Social Security in 2007 and just 7%
received more than $20,000 in Social Security benefits. Because many elderly
households have more than one beneficiary, the amount of Social Security benefits
received by households with at least one beneficiary is higher than the amount
received by individual recipients. In 2007, 20% of elderly beneficiary households
received less than $10,000 from Social Security, while 30% of households received
Social Security benefits totaling more than $20,000. (See Figure 12.)
CRS-14
Table 3. Social Security as a Percentage of Individual Income
among Recipients Aged 65 and Older in 2007
Percent of Income from
Recipients
Percent of
Social Security
(thousands)
Recipients
Less than 10%
894
2.8
10% to 19%
2,057
6.5
20% to 29%
2,138
6.8
30% to 39%
2,289
7.2
40% to 49%
2,574
8.2
50% to 59%
2,487
7.9
60% to 69%
2,150
6.8
70% to 79%
1,992
6.3
80% to 89%
2,162
6.9
90% to 99%
3,992
12.6
100% of income
8,820
28.0
Source: CRS analysis of the M arch 2008 Current Population Survey.
Note: In 2007, 31.6 million people aged 65 or older received income from Social Security, and 5.2
million elderly people had no Social Security income.
Table 4. Social Security as a Percentage of Household Income
among Recipient Households Aged 65 and Older in 2007
Percent of Income from
Households
Percent of
Social Security
(thousands)
Households
Less than 10%
799
3.7
10% to 19%
2,044
9.5
20% to 29%
2,054
9.5
30% to 39%
1,965
9.1
40% to 49%
1,919
8.9
50% to 59%
1,943
9.0
60% to 69%
1,742
8.0
70% to 79%
1,477
6.8
80% to 89%
1,466
6.8
90% to 99%
2,260
10.5
100% of income
3,932
18.2
Source: CRS analysis of the M arch 2008 Current Population Survey.
Note: In 2007, 21.6 million households in which the householder or the household’s spouse was 65
or older received Social Security, and 3.9 million elderly households had no Social Security income.
CRS-15
Figure 11. Social Security Income of Individuals Age 65+, 2007
Figure 12. Social Security Income of Households Age 65+, 2007
Source: CRS analysis of the M arch 2008 Current Population Survey.
CRS-16
Pension Income
Since the late 1970s, the proportion of American workers who participate in
employer-sponsored retirement plans has remained fairly stable at about half of the
workforce. The Department of Labor’s National Compensation Survey reports that
in March 2008, 51% of all private-sector workers participated in an employer-
sponsored retirement plan of some kind. However, a point-in-time snapshot of pension
participation is a poor indicator of who will receive pension income in retirement.
Some workers not covered by a pension plan today may have earned a pension at a
previous job, or they may earn a pension benefit in the future. Others who are
currently participating in a pension plan may never fully vest in their pension benefit,
or they might take their accrued benefit as a lump sum before retirement and spend all
or part of the distribution.
To receive pension income in retirement, an individual must remain a participant
in the plan long enough to earn a pension benefit and must not spend the accrued
benefit before retirement. In 1986, Congress shortened the maximum vesting period
(the length of time it takes to earn a pension benefit) from 10 years to 5 years, thus
making it easier for employees whose employer sponsors a pension to earn a benefit
under the plan.5 On the other hand, many employers offer separating employees the
opportunity to take their accrued retirement benefit as a lump-sum distribution. Most
defined contribution plans, such as those authorized under §401(k) of the Internal
Revenue Code, and some defined benefit plans permit departing employees to take a
lump-sum distribution. Many employees roll these distributions into another
employer-sponsored retirement plan or into an individual retirement account, but some
spend all or part of the distribution, thus reducing their future retirement income.6
In 2007, 12.1 million people aged 65 and older — 34.7% of that age group —
received income from a private or public pension.7 Of these people, 4.0 million had
income from a public-sector pension — that is, from previous employment in the
federal, state, or local government — and 8.4 million received income from private-
sector pension plans.8 Together, the federal, state, and local governments account for
only about one-seventh of all jobs in the United States. In 2007, for example, just
14% of all workers in the United States were employed by the federal, state, and local
5 Tax Reform Act of 1986, P.L. 99-514. The Pension Protection Act of 2006 (P.L. 109-280)
further reduced the maximum vesting period in many plans to three years.
6 See CRS Report RL30496, Pension Issues: Lump-sum Distributions and Retirement
Income Security, by Patrick Purcell.
7 As reported here, “pension income” includes payments from a company or union pension,
payments from a federal, state, or local government pension, military retirement pay, regular
payments from an annuity or paid-up insurance policy, and regular payments from an IRA,
Keogh account, or a §401(k)-type account. As defined on the CPS, pension income does
not include lump-sum distributions from pension plans. To the extent that individuals
receive lump-sum distributions from plans and later draw on those amounts to supplement
their income, the CPS understates individual and household income from pension plans.
8 These numbers sum to 12.4 million. About 300,000 people had both types of pension.
CRS-17
governments. Nevertheless, one-third of pension recipients aged 65 and older
received income from government-sponsored pension plans in 2007.
The disparity between the percentage of jobs that are in the government sector
and the percentage of retirees with government pensions is accounted for mainly by
two factors, both of which make it more likely that a government employee will earn
a pension benefit than will a worker in the private sector. First, more government jobs
than private-sector jobs offer pension benefits to their employees. According to the
Department of Labor, in March 2008, 89% of sate and local government employees
worked at jobs that offered retirement benefits, compared to 61% of employees in the
private sector. Second, government employees tend to stay in their jobs longer than
private-sector workers, making it more likely that the government employee will fully
vest in the pension benefits he or she has earned. The Department of Labor reports
that in January 2008, the median tenure of government workers with their current
employer was double the median tenure of workers in the private sector. Public-sector
employees had a median tenure of 7.2 years, while private-sector workers had a
median tenure of 3.6 years.9
Public-sector employees not only are more likely to receive a pension in
retirement than are workers in the private-sector; they also receive larger pensions
than those who worked in the private sector. Among the 4.0 million people age 65 and
older who reported income from a government pension in 2007, the median annual
amount was $16,629. Twenty-nine percent of people receiving a public-sector
pension had pension income of less than $10,000 in 2007, while 25% reported pension
income of more than $30,000. (See Figure 13) Among the 8.4 million people age 65
and older who reported income from a private-sector pension in 2007, the median
annual amount was $7,200. Sixty percent of private pension recipients reported that
their pension income was less than $10,000 in 2007 and 8% reported pension income
of more than $30,000.
Among the 3.7 million elderly households that reported income from a
government pension in 2007, the median annual amount was $17,400. Twenty-seven
percent of households receiving a public-sector pension reported that their pension
income was less than $10,000 in 2007, while 29% reported pension income of more
than $30,000. (See Figure 14) Among the 7.7 million elderly households that
reported income from a private-sector pension in 2007, the median annual amount was
$8,052. Fifty-seven percent of households with private pension income reported that
their pension income was less than $10,000 in 2007 and 10% reported pension income
of more than $30,000.
9 U.S. Bureau of Labor Statistics, news release USDL 08-1344, Employee Tenure in 2008,
September 26, 2008, at [http://www.bls.gov/news.release/tenure.nr0.htm].
CRS-18
Figure 13. Individual Income from Pensions in 2007
Figure 14. Household Income from Pensions in 2007
Source: CRS analysis of the M arch 2008 Current Population Survey.
CRS-19
Two Types of Pension Plans
Over the past 25 years, there has been a shift in the distribution of retirement
plans and of plan participants from defined benefit plans to defined contribution
plans. A defined benefit or “DB” plan usually pays as a lifelong annuity based on
the employee’s length of service and average salary. Most DB plans are funded
entirely by employer contributions and investment earnings. Defined contribution
or “DC” plans are much like savings accounts maintained by employers on behalf
of each participating employee. The employer contributes a specific dollar amount
or percentage of pay, which is invested in stocks, bonds, or other assets. The
employee usually contributes to the plan, too. In a DC plan, it is the employee who
bears the investment risk. At retirement, the balance in the account is the sum of
all contributions plus interest, dividends, and capital gains — or losses. The
account balance is usually distributed as a single lump sum. Many large employers
recently have converted their traditional DB pensions to hybrid plans that have
characteristics of both DB and DC plans, the most popular of which has been the
cash balance plan. In a cash balance plan, the benefit is defined in terms of an
account balance. The employer makes contributions to the plan and pays interest
on the accumulated balance. However, these account balances are merely
bookkeeping devices. They are not individual accounts owned by the participants.
Legally, therefore, a cash balance plan is a defined benefit plan.
CRS-20
Income from Assets
Many Americans prepare for retirement by saving and investing some of their
income while they are working. Of the 36.8 million Americans age 65 and older who
were living in households in 2007, 18.9 million (51%) received income from assets,
such as interest, dividends, rent, and royalties. Most received small amounts. Half
of those who had income from assets in 2007 received less than $1,585. The data
displayed in Figure 15 show that low-income individuals were less likely to have
received income from assets. Among individuals age 65 and older whose total income
in 2007 was less than $10,000, 30% had asset income. In contrast, of those whose
total income was more than $50,000, 83% had asset income.
Of the 25.5 million households in which either the householder or the
householder’s spouse was age 65 or older in 2007, 14.5 million (57%) received
income from assets. Most households received relatively small amounts of income
from assets. Half of the elderly households that had income from assets in 2007
received less than $2,254. The data displayed in Figure 16 show that low-income
households were less likely to have received income from assets. Among elderly
households that had total income in 2007 of less than $10,000, 23% had asset income.
On the other hand, of the households with total income of more than $50,000, 79%
had asset income.
CRS-21
Figure 15. Percentage of Individuals Age 65 and Older with Income from
Assets in 2007, by Total Individual Income
Figure 16. Percentage of Households Age 65 and Older with Income from
Assets in 2007, by Total Household Income
Source: Both figures from CRS analysis of the M arch 2008 Current Population Survey.
CRS-22
Median income from assets also differed between the lower-income and higher-
income elderly. Among people age 65 and older with total annual income under
$10,000 in 2007, 30% received asset income and the median amount of asset income
was only $338. For individuals with total annual incomes of more than $50,000, 83%
had asset income and their median asset income in 2007 was $14,416. (See Table 5.)
Among households in which the householder or spouse was 65 or older with total
annual incomes under $10,000 in 2007, 23% received income from assets and the
median amount of asset income they received was $219. Among elderly households
with total annual incomes of more than $50,000, 79% received asset income, and their
median asset income in 2007 was $9,000. (See Table 6.)
Table 5. Income from Assets, Individuals 65 and Older, 2007
Number of
Percent
People
with Asset
Mean Asset
Median
Total Income, 2007
(thousands)
Income
Income
Asset Income
Less than $10,000
7,897
29.8%
$888
$338
$10,000 to $19,999
12,184
44.6
1,947
726
$20,000 to $29,999
5,647
62.6
3,726
1,799
$30,000 to $39,000
3,084
71.1
5,618
2,280
$40,000 to $49,999
1,770
74.5
8,611
4,000
$50,000 or more
4,903
82.6
26,320
14,416
All persons with
any income10
35,485
53.2
$8,265
$1,585
Table 6. Income from Assets, Households 65 and Older, 2007
Number of
Percent
Households
with Asset
Mean Asset
Median
Total Income, 2007
(thousands)
Income
Income
Asset Income
Less than $10,000
2,215
22.7%
$814
$219
$10,000 to $19,999
6,058
39.8
1,355
400
$20,000 to $29,999
4,418
54.7
2,937
1,285
$30,000 to $39,000
2,991
63.0
4,401
2,014
$40,000 to $49,999
2,133
65.4
6,116
2,844
$50,000 or more
7,384
79.4
24,584
9,000
All households with
any income11
25,199
57.4
$11,869
$2,254
10 Of 36.790 million individuals aged 65 and older in 2007, 35.485 million (96.5%) reported income
from one or more sources and 18.889 million (51.3%) reported income from assets.
11 Of 25.483 million households with a householder or spouse aged 65 and older in 2007, 98.9% had
income from any source and 4.476 million (56.8%) had income from assets.
CRS-23
Earned Income
While some people continue to work into their 60s and beyond, labor force
participation rates begin to drop after about age 55. Although there was a trend
toward earlier retirement from about 1960 to 1985, the trend for the past 20 years has
been that more Americans have continued to work at older ages.12 In March 2008,
73% of men and 63% of women between the ages of 55 and 61 were working either
full-time or part-time. Of those between the ages o f 62 and 64, 52% of men and 41%
of women were employed. Among 65 to 69-year olds, 33% of men and 26% of
women were employed in March 2008. While the share of older Americans who work
declines rapidly after age 65, Figure 17 shows that 14% of men and 8% of women
who were age 70 or older in March 2008 were still working.
Despite the trend to longer working lives, people are progressively less likely to
work as they pass age 55 and the average annual earnings of those who continue to
work begin to decline at about the same age. This can be attributed to decreases in
both wages and the number of hours worked.13 In 2007, the median earnings of
workers aged 55 to 61 were $38,500, while median earnings of workers aged 62 to 64
were $31,000. For those age 65 or older who were working, median earnings were
$20,000 in 2007. Figure 18 shows the decline in workers’ annual earnings as they
age. At the top of the earnings scale, 37% of workers aged 55 to 61 earned $50,000
or more in 2007, while only 23% of those age 65 and older had earned income totaling
more than $50,000 in that year. In contrast, while only 9% of Americans aged 55 to
61 who worked in 2007 had total earnings of less than $10,000, 28% of workers age
65 and older had earnings of $10,000 or less.
12 Joseph Quinn, “Retirement Trends and Patterns Among Older American Workers” in
Stuart Altman and David Shactman (eds.), Policies for an Aging Society (Baltimore: Johns
Hopkins University Press, 2002), pp. 293-315.
13 For more information on the labor force participation of older workers, see CRS Report
RL30629, Older Workers: Employment and Retirement Trends, by Patrick Purcell.
CRS-24
Figure 17. Employment Rates by Age and Sex, March 2008
Figure 18. Earned Income, by Age, 2007
Source: Both figured from CRS analysis of the M arch 2008 Current Population Survey.
CRS-25
Poverty
Poverty among the elderly has decreased dramatically over the past five decades.
In 1959, the poverty rate among Americans age 65 and older was 35%. Largely due
to increases in Social Security benefits, the elderly poverty rate fell to about 15% by
1975. The percentage of older Americans in poverty has stayed steady at roughly 10%
since the mid-1990s. Although a smaller percentage of the elderly are in poverty than
are people under 65, almost 3.6 million Americans age 65 and older had family
incomes below the federal poverty threshold in 2007.14
While the poverty rate for all persons aged 65 and older was 9.7% in 2007, the
poverty rates among women, minorities, single individuals, those with low education,
and the oldest old were higher. (See Figure 19.) Twelve percent of women age 65
and older were in poverty in 2007 compared with only 6.6% of men. Because women
live longer, the number of poor older women in 2007 (2.5 million) was more
than twice the number of poor older men (1.0 million). Poverty rates are especially
high among minorities. In 2007, nearly one-quarter of elderly African-Americans and
more than one-sixth of elderly Hispanics were in poverty. About 80% of all older
Americans identify themselves as white. Thus, while only 7.4% of older white
Americans were poor, poor whites comprised 60% of all poor elderly in 2007.
Older individuals with low education also had high poverty rates. Eighteen
percent of those without a high school education had family incomes below the
poverty line in 2007 compared with only 4.3% of those with a college degree. There
is a significant difference in the poverty rates of married persons and single elderly
individuals. Married couples, who often have more than one source of income, had
a poverty rate of only 4.2% in 2007. In contrast, 16.2% of unmarried individuals age
65 and older had incomes below the poverty threshold in 2007. The oldest Americans
had the highest poverty rates. Among individuals 80 and older, 11.5% were poor in
2007, compared with 8.5% of those between the ages of 65 and 69.
The Near-Poor
Many older Americans have family incomes that put them just above the official
poverty threshold. In 2007, only 9.7% of people age 65 and older had incomes below
the poverty thresholds of $9,944 for an individual and $12,550 for a couple; however,
another 13% of Americans age 65 and older had family incomes between 100% and
149% of the poverty threshold. Also, while 11.5% of persons age 80 and older had
incomes below the poverty threshold, another 17.4% of people age 80 and older had
family incomes between 100% and 149% of the poverty threshold in 2007.
14 The official poverty threshold in 2007 for a single person aged 65 or older was $9,944.
The poverty threshold for a couple in which at least one member was 65 or older was
$12,550. See Poverty Thresholds 2007, available at
[http://census.gov/hhes/www/poverty/threshld/thresh07.html].
CRS-26
Figure 19. Percentage of Individuals Age 65 and Older in Poverty, 2007
Source: CRS analysis of the M arch 2008 Current Population Survey.
Conclusion
Americans age 65 and older receive income from a variety of sources. Although
Social Security benefits, pensions, and income from assets are the most common
income sources, earnings also are important, especially for those under age 70.
There are large disparities in the amounts and types of income that older
Americans receive. Income from assets in the form of interest and dividends, for
example, make up a significant percentage of the aggregate income of the elderly
population. However, most elderly individuals receive only modest amounts of
interest and dividend income, while a relatively small number of people receive large
amounts of income from these sources. Social Security is both the largest source of
aggregate income among the elderly and the biggest single source of income for a
majority of Americans age 65 and older. Compared to the great disparity in interest
and dividend income, there is relatively little difference between the average monthly
Social Security benefit and the highest monthly benefit. This is because the Social
Security benefit formula limits the maximum amount paid to a retired high-wage
earner to about 150% of the amount paid to a career-long average-wage worker.
Social Security and public assistance together provide more than 90% of all
income for the poorest 25% of the elderly population. These public programs have
CRS-27
contributed greatly to reducing poverty among the elderly. The reduction in poverty
among older Americans is one of the most significant public policy successes of the
past half-century. Poverty among those age 65 and older has fallen from one in three
older persons in 1960 to fewer than one in ten today. Although the overall rate of
poverty is relatively low, it remains high for women, minorities, the less-educated,
single persons, and those over age 80.
Document Outline