Elderly Poverty in America: Causes, Data, and Policy Solutions

Introduction: The Scope of Elderly Poverty in America

Poverty is defined as having a meager annual income insufficient for meeting basic expenditures. Research has confirmed that older adults aged 65 and above, when poor, face an immense burden in meeting basic housing, food, healthcare, and other expenses. Poverty among elderly populations is a persistent and serious issue in America. Almost 10% of elderly individuals aged 65 and above belong to families with annual incomes below America's official poverty line, also known as the federal poverty level (FPL). An older adult aged 65 or above who lives alone was classified as "poor" if his or her annual pre-tax income amounted to less than $10,326 in 2008. Elderly couples with incomes under $13,014 were similarly classified as poor.

Roughly one in every six elderly individuals was nearly poor or poor, with income less than 125% of the FPL; nearly a third of the elderly had low incomes — less than 200% of the FPL. A fact that is very often overlooked is that 3.7 million elderly persons do not have adequate cash income to meet their basic expenditures. The most common perception is that the problem of poverty among the elderly has largely been resolved. Since 1968, the older adult poverty rate has dropped by nearly a third, declining from 25% in 1968 to 9.7% in 2008. By contrast, poverty among younger adults, and particularly among young children, has increased in recent times even as gross domestic product (GDP) per capita — a key indicator of national prosperity — has risen.

However, poverty among individuals aged 65 and older has been inaccurately measured, and poverty rates remain excessively high in specific communities. For example, 20% of Hispanic or Black older adults are poor. Poverty also affects unmarried or inadequately educated older individuals particularly severely. A majority of the elderly poor are not married: 43% are widowed, 19% are separated or divorced, and 8% have never married. Older Black women are especially likely to live in poverty. Approximately 25% of older Hispanic or Black women are poor, while over a third of them are nearly poor or poor — that is, with incomes lower than 125% of the FPL (O'Brien, Wu & Baer, 2010).

This report provides an overview of social work with elderly people — what it is, why it is necessary, its aims, its knowledge base and skills, the populations and contexts where it functions effectively, and the level of evidence associated with its effectiveness. The report also addresses key issues that affect social work when dealing with elderly people and proposes a way forward involving social work to meet the needs of the elderly population (Milne et al., 2014).

Remarkable progress has been made in reducing the poverty rate among American elderly individuals. In the first ten years after an official poverty measure was adopted by the federal government, the fraction of elderly poor declined dramatically, from 25% in 1968 to 14% in 1978. This abrupt drop during the 1960s and 1970s was almost entirely due to considerable increases in Social Security benefits during that period. Since then, progress has become more gradual; the official poverty rate among elderly individuals has remained at approximately 10% over the past decade. However, though the proportion of poor individuals aged 65 and above has decreased over the past four decades, the absolute number of elderly poor has remained somewhat constant since the mid-1970s because of overall growth in the older adult population (O'Brien, Wu & Baer, 2010).

The median poor older family spends 60% of its annual household income on housing, according to a 2008 estimate. In other words, housing expenditures are exceptionally unaffordable — consuming over 50% of household income — for more than half (56.9%) of elderly poor families. Using a less restrictive standard, over 75% of elderly poor families face housing affordability challenges, spending more than 30% of their household income on housing in 2008. Food is considerably less costly than housing in poor elderly people's budgets; however, a growing number of near-poor and poor elderly families faced serious challenges in feeding themselves as of 2008 (O'Brien, Wu & Baer, 2010).

Income Sources and Financial Dependence Among the Elderly Poor

Social Security represents the largest single source of income for the elderly poor. In 2008, roughly three-fourths of poverty-stricken households with a head of family aged 65 or above received income through Social Security; the remaining one-fourth did not report receiving Social Security at all. Elderly poor households were highly unlikely to receive income through earnings (7.5%) or pensions (7.8%). Around 14% of elderly poor households received income through Supplemental Security Income (SSI) or other community assistance programs, and just over 20% had income from personal assets; however, the amount of asset income received by those who had it was trivial — usually barely over $200 per year.

The elderly poor are not only considerably less likely than non-poor elderly individuals to receive income from earnings, assets, pensions, and the like, but even when they do derive income from these sources, the amounts are smaller than those received by non-poor elderly households. Social Security constitutes more than 75% of the household income of low-income and poor elderly households — that is, those with incomes below 200% of the FPL — with retirement savings, earnings, and community assistance (chiefly SSI) bridging the gap. Community assistance makes up a very small share of the elderly poor's income (8.3%), reflecting SSI's modest benefits and limited reach.

Elderly poor persons depend heavily on SSI and other Social Security programs. Income data reveal that older households with minimal incomes rely far more heavily on such programs than do higher-income elderly households. Social Security is the sole source of income for 45% of poverty-stricken older adults. Most elderly poor individuals (59%) depend on Social Security for nearly all — 90% or more — of their household income. Of those who are most heavily dependent on Social Security — meaning 90% or more of annual income is Social Security-derived — 84% have low household incomes (below 200% of FPL), though most are not technically poor. In 2008, 22% of the elderly were poor, but nearly two-thirds had incomes between 100% and 200% of the FPL (O'Brien, Wu & Baer, 2010).

Poverty rates among elderly individuals also vary by state. Because SSI and Social Security deliver consistent federal benefits, the proportion of elderly persons living in poverty varies considerably less across the United States than does the proportion of children living in poverty. In 2008, the proportion of the elderly population classified as poor ranged from 3.7% in Alaska to 16.9% in Mississippi.

Disparities by Gender, Race, and Geography

As with other age groups, poverty does not affect older women and men equally. For women, a lifetime of lower earnings stemming from wage discrimination, employment in jobs unlikely to offer employer-sponsored retirement benefits, and time away from the labor market for childbearing all contribute to higher poverty rates in old age. More than 2.3 million women aged 65 and over (11.5%) live at or below the poverty line, while slightly more than one million (6.6%) of elderly men live in poverty. Roughly one in every five — 19%, more precisely — widowed, divorced, or single women aged over 65 are poor. The poverty risk for older women rises further with age. Women aged 75 and above are three times as likely as men in the same age group to live in poverty. The number of men in that age group at or below the poverty line is 416,000, while more than 1.3 million women aged 75 and over are poverty-stricken. Among married women, longer female life expectancy makes them more likely to outlive their husbands, leaving them without the additional income men brought into the household (Cawthorne, 2008).

Aging Black Americans are more prone to experience poverty than white Americans, among whom the poverty rate is 7.9%. Social Security plays a significant role in lifting numerous Black individuals above the poverty line. Older Black Americans are less likely to participate in private retirement plans and are much less likely to receive asset income — including interest on bank accounts, investment returns, property rents, dividends, and income from trusts and estates. Black Americans constitute only around 9% of the U.S. elderly population, yet they make up 21% of older adults living below the poverty line. Approximately 25% of all older Black American citizens are poor. Excluding the financial benefits of all public programs from Black Americans' incomes, more than 6 out of 10 Hispanic-American and African-American elderly individuals would fall into poverty. When Social Security is counted, this rate drops to around 3 out of 10. If income from other community programs is also included, 17% of Hispanic-American and 21% of African-American older adults remain poor. Asian Americans' dependence on SSI and other public assistance programs is comparatively lower than that of other older minority groups; however, a 12% poverty rate is still observed among elderly Asian Americans, which remains higher than the rate for white Americans (Cawthorne, 2008).

Elderly people residing in rural areas show higher poverty rates than those in urban areas. Furthermore, rural areas tend to have a greater share of older adults in their overall population compared to urban regions. This pattern results from a combination of economic pressures that drive younger people from rural backgrounds to migrate to cities in search of employment, and the tendency of rural elders to remain in place and age in their communities. Rural individuals are less inclined to leave their homes after retiring than their urban counterparts. Elderly rural residents may also have lesser access to essential services and depend more heavily on private means of transport (Cawthorne, 2008).

Conclusion and Future Directions

An array of reforms for ending poverty among the elderly may appear unlikely in today's political environment, wherein debate focuses on limiting public spending. With policymakers deliberating over different options to reduce federal entitlement costs, a risk exists that budget reforms will not decrease, but instead increase, the number of elderly persons living below the poverty line. Alternatives that target overall spending reductions should, at a minimum, strengthen protections for older individuals in the lowest income groups. Identifying the importance of offering comprehensive, tailored support services to older service users — and developing policy responses aligned with elderly people's needs — are important priorities for the future.

The recommended approach is a retirement savings option paired with an improved minimum Social Security benefit. This approach has two major elements: (1) apply a targeted benefit based on total years of service, which reinforces benefits for low-wage, long-term workers; and (2) offer credit for up to three years of job loss resulting from poor health or unemployment for workers who earn low wages. The recommendation incorporates funding provisions that would result in some reduction of redistribution to higher-income recipients under the current system. The improved minimum benefit would provide a work incentive by rewarding longer periods of earnings while simultaneously acknowledging the hardships faced by low-wage workers.

This minimum benefit would equal 60% of the poverty threshold for individuals who have worked 20 years; the benefit would rise by 2.5% of the poverty threshold for each additional year of work, reaching a maximum of 110% of the poverty threshold upon completion of 40 work years. Both retired and disabled workers would qualify for this minimum benefit. The poverty percentages underlying the minimum are based on claiming at the average retirement age for Social Security; technically, minimum benefits are calculated as adjustments to the Primary Insurance Amount (PIA).

This minimum benefit recommendation is primarily intended to reach individuals with low, long-term wages. It does not aim to phase out or replace the SSI program, which serves as a last resort for persons without a significant work history — a fact demonstrated by the requirement of a minimum of twenty years of service to qualify. Furthermore, the recommendation is not intended to supplement high-wage workers who voluntarily leave the workforce. It is targeted at individuals with low lifetime earnings who remain low earners throughout most of their careers or who experience modest career interruptions due to health events or involuntary layoffs.

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