Friday, November 25, 2005
Older Americans are an economically diverse group. In 2004, the median income of individuals age 65 and over was $15,199, but incomes varied widely around this average. Twenty-eight percent of Americans 65 or older had incomes of less than $10,000 in 2004, while 10% had incomes of $50,000 or more. As Congress considers reforms to Social Security and the laws governing pensions and retirement savings plans, it may be helpful to consider 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 2005 Current Population Survey, this report describes the number of elderly receiving income from each of these sources and the extent to which income from each source is either concentrated at the high- or low-end of the income distribution or is evenly distributed.
Retirement benefits from Social Security and pensions are the most common source of income among the aged. In 2004, Social Security paid benefits to 88% of Americans age 65 and older. Social Security is also the largest single source of income among the aged. Sixty-nine percent of Social Security beneficiaries age 65 or older receive more than half of their income from Social Security. For 39% of elderly recipients, Social Security contributes more than 90% of their income, and for nearly one-quarter of recipients, it is their only source of income. In 2004, 35% of people age 65 and older received income from a private or public pension. Among people age 65 and older who reported income from a government pension, the median annual amount was $15,600. Among recipients of private pensions, the median amount received in 2004 was just $6,720.
Many Americans prepare for retirement by saving and investing some of their income while they are working. Of the 35.2 million Americans age 65 or older who were living in households in 2004, 19.7 million (56%) 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 2004, half received less than $952.
Earnings from work continue to be 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 2004, median earnings for individuals age 55-61 who worked were $34,000, while median earned income for workers age 62-64 was $27,000. For workers 65 and older, the median earned income was $15,000.
Poverty among those age 65 and older has fallen from one-in-three older persons in 1960 to one-in-ten today. While the overall rate of poverty is relatively low, it remains high for women, minorities, the less-educated, and those over age 80.