CRS Report–Income and Poverty of the Aged

September 24, 2007

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OlderAmericans are an economically diverse group. In 2006, the median incomeof individuals aged 65 and older was $16,890, but incomes varied widelyaround this average. Twenty-three percent of Americans 65 or older hadincomes of less than $10,000 in 2006, while 12% had incomes of $50,000or more. As Congress considers reforms to Social Security and the lawsgoverning pensions and retirement savings plans, it may be helpful toexamine how changes to one income source would affect each of theothers, and thus the total income of older Americans Older personsreceive income from a variety of sources, including earnings, pensions,personal savings, and public programs such as Social Security andSupplemental Security Income. Using data from the March 2007 CurrentPopulation Survey, this report describes the number of elderlyreceiving income from each of these sources and the extent to whichincome from each source is either concentrated at the high end or lowend of the income distribution or is evenly distributed. Retirementbenefits from Social Security and pensions are the most common sourcesof income among the aged. In 2006, Social Security paid benefits to 86%of Americans aged 65 and older. Social Security is also the largestsingle source of income among the aged. Sixty-eight percent of SocialSecurity beneficiaries aged 65 or older receive more than half of theirincome from Social Security. For 39% of elderly recipients, SocialSecurity contributes more than 90% of their income, and for one-quarterof recipients, it is their only source of income. In 2006, 35% ofpeople aged 65 and older received income from a private or publicpension. Among people aged 65 and older who reported income from agovernment pension, the median annual amount was $14,400. Amongrecipients of private pensions, the median amount received in 2006 wasjust $7,200. Many Americans prepare for retirement by saving andinvesting some of their income while they are working. Of the 36.0million Americans aged 65 or older who were living in households in2006, 19.4 million (54%) received income from assets, such as interest,dividends, rent, and royalties. Most received small amounts of incomefrom the assets they owned. Of all individuals aged 65 or older whoreceived income from assets in 2006, half received less than $1,685.Earnings from work continue to be an important source of income forolder Americans, especially those under age 70. Although there was atrend toward earlier retirement from about 1960 to 1985, over the past20 years more Americans have continued to work at older ages. In 2006,median earnings of individuals aged 55-61 who worked were $37,000,while the median earnings of workers aged 62-64 were $30,000. Amongworkers 65 and older, median earnings were $19,000. Poverty among thoseaged 65 and older has fallen from one in three older persons in 1960 toless than one in ten today. Although the overall rate of poverty isrelatively low, it remains high for women, minorities, theless-educated, and people over age 80. This report will be updatedannually.