Income and Poverty Among Older Americans in 2007

Income and Poverty Among
Older Americans in 2007
Updated October 3, 2008
Patrick Purcell
Specialist in Income Security
Domestic Social Policy Division

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 aged 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. One-third of people aged 65
and older, and fewer than one-half of elderly households, received income from a
private or public pension in 2007. Among individuals aged 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 aged 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 individuals aged 65 or older who received
income from assets in 2007, half received less than $1,585. Of households with a
householder or spouse aged 65 or older, 57% percent 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 aged 55 to 64 who worked were
$37,000, while the median earnings of workers aged 65 to 69 were $25,000. Among
all workers 65 and older, median earnings in 2007 were $20,000. Poverty among
those aged 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
In troduction ......................................................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 Aged 65+, 2007..........15
Figure 12. Social Security Income of Households Aged 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 Individuals Aged 65 and Older with
Income from Assets in 2007, by Total Individual Income..............21
Figure 16. Percentage of Households Aged 65 and Older with
Income from Assets in 2007, by Total Household 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 Aged 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 of Those 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 aged 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 18²
to 64 years old (10.9%) and the poverty rate among children under age 18 (18.0%).
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

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].

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.
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 in³
the family.
Median Individual and Household Income
In 2007, 96.5% of individuals aged 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 aged 65 or older had income from earnings in

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.

2007, and the median earned income of these individuals was $20,000. Because
most individuals aged 65 and older receive Social Security, the proportion of elderly
households that had income from Social Security in 2007 was only slightly higher
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 aged 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
aged 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 aged 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 aged 65 and older. Among elderly
households with asset income, the median amount of asset income was $2,254,
whereas 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; 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; 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; among elderly individuals with income from other sources, the median
amount received in 2007 was $4,000.

Table 1. Percentage of Older Individuals with Income in 2007,
Mean and Median Amounts, by Source
^Ag^e
^To^t^a^l,^To^t^a^l,
⁵⁵⁺^{55 to 64}⁶⁵⁺^{65 to 69}^{70 to 79}⁸⁰⁺
^T^o^talⁱⁿ^dⁱ^vi^d^u^a^l^s⁽ⁱⁿ^th^ou^s^aⁿ^d^s⁾^70,092^33,302^36,790^11,165^15,776^9,849
^{Percentage reporting no incom}^e^5.0⁶^.5^3.5³^.7^3.6³^.3
^To^t^a^{l inco}^m^e
^Percen^t^a^g^e^wⁱ^t^h^an^yⁱⁿ^com^e^95.0^93.5^96.5^96.3^96.4^96.7
^Mean^t^o^t^a^lⁱⁿ^com^e^($)^36,754^46,223^28,449^35,823^26,627^23,033
^Medi^an^t^o^t^a^lⁱⁿ^com^e^($)^22,800^33,000^17,382^21,841^16,722^15,648
^Ea^rⁿ^ing^s
^Percen^t^a^g^e^wⁱ^t^h^earnⁱⁿ^g^s^42.8^68.4^19.7^35.1^17.3⁶^.0
^Mean^earnⁱⁿ^g^s^($)^46,088^49,422^35,591^39,485^29,849^36,225
^Medi^an^earnⁱⁿ^g^s^($)^33,000^37,000^20,000^25,000^15,600^18,200
^{Social Security}
^Percen^t^a^g^e^wⁱ^t^h^S^o^ci^al^S^ecu^ri^t^y^53.0^16.8^85.8^78.1^88.5^90.1
^Mean^S^o^ci^al^S^ecu^ri^t^y^($)^12,014^11,425^12,119^12,273^11,934^12,260
^Medi^an^S^o^ci^al^S^ecu^ri^t^y^($)^11,802^10,722^11,922^11,922^11,802^11,922
^P^{ublic pensio}^ns
^Percen^t^a^g^e^wⁱ^t^h^pu^blⁱ^c^pen^sⁱ^oⁿ^s^8.7⁶^.4^10.9^10.9^11.0^10.6
^Mean^pu^blⁱ^c^pen^sⁱ^oⁿ^($)^23,531^26,445^21,991^25,231^21,904^18,358
^Medi^an^pu^blⁱ^c^pen^sⁱ^oⁿ^($)^18,000^22,000^16,629^19,200^17,000^14,400
^P^r^iv^a^t^{e pensio}^{ns o}^r^a^nnuitⁱ^es
^Percen^t^a^g^e^wⁱ^t^h^pri^v^at^{e pen}^sⁱ^oⁿ^s^15.9⁸^.3^22.8^19.6^23.7^24.8
^Mean^pri^v^at^{e pen}^sⁱ^oⁿ^($)^12,809^16,475^11,605^14,137^11,088^10,135
^Medi^an^pri^v^at^{e pen}^sⁱ^oⁿ^($)⁸^,388^12,000^7,200^9,500^7,200^6,288
^Inc^o^m^e^f^r^o^m^a^sse^t^s
^Percen^t^a^g^e^wⁱ^t^h^as^s^e^tⁱⁿ^com^e^52.4^53.5^51.3^52.3^51.8^49.7
^Mean^as^s^e^tⁱⁿ^com^e^($)⁷^,366^6,413^8,265^9,120^8,128^7,473
^Medi^an^as^s^e^tⁱⁿ^com^e^($)¹^,301^1,011^1,585^1,601^1,800^1,375
^Veteran^s^{’ b}^eⁿ^e^fi^ts
^P^e^r^cen^tag^e^w^ith^v^e^ter^aⁿ^s^’^b^eⁿ^e^f^its²^.⁵²^.4²^.⁷²^.1²^.²⁴^.1
^M^e^aⁿ^ve^t^e^r^a^{ns’ b}^e^ne^fi^t⁽^$⁾^11,880^12,579^11,322^11,558^12,494^10,160
^M^e^dⁱ^aⁿ^ve^t^e^r^a^{ns’ b}^e^ne^fi^t⁽^$⁾⁸^,532^8,544^8,400^8,532^10,248^6,480
^P^ublic^a^ssist^aⁿ^c^e^a
^Percen^t^a^g^e^wⁱ^t^h^pu^blⁱ^c^as^sⁱ^s^t^an^ce^3.2³^.2^3.3³^.3^3.0³^.5
^Mean^pu^blⁱ^c^as^sⁱ^s^t^an^{ce ($)}⁶^,174^7,105^5,335^5,650^5,108^5,311
^Medi^an^pu^blⁱ^c^as^sⁱ^s^t^an^{ce ($)}⁶^,120^7,440^4,776^4,800^4,416^4,800
^{Other incom}^e^b
^Percen^t^a^g^e^wⁱ^t^h^ot^h^e^{r i}ⁿ^com^e^4.2⁵^.4^3.2³^.5^3.2²^.8
^Mean^ot^h^e^{r i}ⁿ^com^e^($)⁸^,421^8,319^8,576^9,010^8,255^8,550
^Medi^an^ot^h^e^{r i}ⁿ^com^e^($)⁴^,344^4,400^4,000^3,588^3,984^4,800
^Source:^C^oⁿ^g^r^es^sⁱ^on^al^R^e^s^earch^S^e^rvⁱ^{ce (C}^R^S^{) an}^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.
^{a. I}ⁿ^clu^d^{es Su}^p^p^l^em^en^{tal Secu}^r^ity^Iⁿ^co^m^e^,^T^e^m^p^o^r^ar^y^A^ssistan^ce^f^o^r^Need^y^Fam^{ilies, an}^d^{state g}^eⁿ^e^r^a^{l assistan}^ce.
^{b. In}^clu^d^es^uⁿ^e^m^p^loy^m^en^{t com}^p^en^s^a^tion^,^w^o^rk^ers^’^com^p^en^s^a^tion^,^an^{d in}^com^e^f^r^om^uⁿⁱ^den^tif^{ied s}^o^u^r^ces^.

Table 2. Percentage of Older Households with Income in 2007,
Mean and Median Amounts, by Source
^Ag^e
^To^t^a^l,^To^t^a^l,
⁵⁵⁺^{55 to 64}⁶⁵⁺^{65 to 69}^{70 to 79}⁸⁰⁺
^T^o^tal^h^o^u^s^eh^ol^d^s⁽ⁱⁿ^th^ou^s^aⁿ^d^s⁾^46,185^20,702^25,483^7,164^10,847^7,472
^{Percentage reporting no incom}^e^1.2¹^.2^1.1¹^.1^1.1¹^.1
^To^t^a^{l inco}^m^e
^Percen^t^a^g^e^wⁱ^t^h^an^yⁱⁿ^com^e^98.8^98.8^98.9^98.9^98.9^98.9
^Mean^t^o^t^a^lⁱⁿ^com^e^($)^61,393^79,521^46,682^62,193^45,365^33,719
^Medi^an^t^o^t^a^lⁱⁿ^com^e^($)^40,689^60,491^29,730^42,214^30,522^21,928
^Ea^rⁿ^ing^s
^Percen^t^a^g^e^wⁱ^t^h^earnⁱⁿ^g^s^56.4^83.1^34.7^56.2^33.7^15.4
^Mean^earnⁱⁿ^g^s^($)^66,262^76,455^46,417^54,967^39,135^39,679
^Medi^an^earnⁱⁿ^g^s^($)^49,000^60,000^30,000^38,000^25,000^24,513
^{Social Security}
^Percen^t^a^g^e^wⁱ^t^h^S^o^ci^al^S^ecu^ri^t^y^59.0^22.4^88.8^80.4^91.5^92.9
^Mean^S^o^ci^al^S^ecu^ri^t^y^($)^16,017^13,513^16,530^16,362^17,265^15,619
^Medi^an^S^o^ci^al^S^ecu^ri^t^y^($)^14,400^12,072^15,012^15,282^15,600^14,022
^P^{ublic pensio}^ns
^Percen^t^a^g^e^wⁱ^t^h^pu^blⁱ^c^pen^sⁱ^oⁿ^s^12.0⁸^.8^14.5^14.5^15.5^13.2
^Mean^pu^blⁱ^c^pen^sⁱ^oⁿ^($)^25,778^29,260^24,054^27,139^24,704^19,706
^Medi^an^pu^blⁱ^c^pen^sⁱ^oⁿ^($)^19,960^24,000^17,400^19,800^19,200^14,400
^P^r^iv^a^t^{e pensio}^{ns o}^r^a^nnuitⁱ^es
^Percen^t^a^g^e^wⁱ^t^h^pri^v^at^{e pen}^sⁱ^oⁿ^s^22.1^12.1^30.2^27.1^32.1^30.7
^Mean^pri^v^at^{e pen}^sⁱ^oⁿ^($)^13,895^17,362^12,771^15,461^12,520^10,877
^Medi^an^pri^v^at^{e pen}^sⁱ^oⁿ^($)⁸^,940^12,000^8,052^10,000^8,272^6,900
^Inc^o^m^e^f^r^o^m^a^sse^t^s
^Percen^t^a^g^e^wⁱ^t^h^as^s^e^tⁱⁿ^com^e^57.8^59.0^56.8^57.0^57.4^55.8
^Mean^as^s^e^tⁱⁿ^com^e^($)^10,639^9,184^11,869^13,970^11,826^9,871
^Medi^an^as^s^e^tⁱⁿ^com^e^($)²^,000^1,600^2,254^2,400^2,490^1,928
^Veteran^s^{’ b}^eⁿ^e^fi^ts
^P^e^r^cen^tag^e^w^ith^v^e^ter^aⁿ^s^’^b^eⁿ^e^f^its³^.⁸³^.7³^.⁸³^.5³^.³⁵^.0
^M^e^aⁿ^ve^t^e^r^a^{ns’ b}^e^ne^fi^t⁽^$⁾^12,147^12,866^11,579^11,238^12,583^10,841
^M^e^dⁱ^aⁿ^ve^t^e^r^a^{ns’ b}^e^ne^fi^t⁽^$⁾⁸^,544^8,400^9,000^7,200^10,248^7,740
^P^ublic^a^ssist^aⁿ^c^e^a
^Percen^t^a^g^e^wⁱ^t^h^pu^blⁱ^c^as^sⁱ^s^t^an^ce^5.1⁵^.6^4.8⁴^.9^4.9⁴^.5
^Mean^pu^blⁱ^c^as^sⁱ^s^t^an^{ce ($)}⁶^,748^7,362^6,163^6,452^5,984^6,144
^Medi^an^pu^blⁱ^c^as^sⁱ^s^t^an^{ce ($)}⁶^,600^7,284^5,376^5,400^4,800^6,000
^{Other incom}^e^b
^Percen^t^a^g^e^wⁱ^t^h^ot^h^e^{r i}ⁿ^com^e^7.4⁹^.9^5.4⁶^.6^5.3⁴^.5
^Mean^ot^h^e^{r i}ⁿ^com^e^($)⁸^,346^7,810^9,144^9,437^8,714^9,467
^Medi^an^ot^h^e^{r i}ⁿ^com^e^($)⁴^,480^4,344^4,800^4,140^4,200^6,000
^Source:^C^oⁿ^g^r^es^sⁱ^on^al^R^e^s^earch^S^e^rvⁱ^{ce (C}^R^S^{) an}^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.
^No^te:^Hou^s^eh^olds^{are g}^r^ou^{ped accordin}^g^{to th}^{e ag}^{e of}^th^e^{older of}^th^{e h}^o^u^s^eh^{older or h}^o^u^s^eh^older’^s^s^pou^s^e^.
^a.^Iⁿ^clu^d^es^Su^p^p^l^em^en^tal^Secu^r^ity^Iⁿ^co^m^e^{, T}^e^m^p^o^r^ar^y^A^ssistan^{ce f}^o^r^Need^y^Fam^{ilies, an}^d^{state g}^eⁿ^e^r^a^{l assistan}^ce.
^{b. In}^clu^d^es^uⁿ^e^m^p^loy^m^en^{t com}^p^en^s^a^tion^,^w^o^rk^ers^’^com^p^en^s^a^tion^,^an^{d in}^com^e^f^r^om^uⁿⁱ^den^tif^{ied s}^o^u^r^ces^.

Sources of Income by Income Quartile
Figures 1 through 4 show the percentage of total income from each source
received by all individuals aged 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 aged 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 aged 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,
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.

Figure 1. Sources of Individual Income, Top Quartile,
Age 65+
2007 Individual Income of More Than $32,160
Public Other Income
Social Assistance2.4%
Security0.1%
18.5%Asset Income

20.8%

Pensions
Earnings21.2%

36.9%

Figure 2. Sources of Individual Income, Second Quartile,
Age 65+

2007 Individual Income of $17,382 to $32,160
Public
Other IncomeAssistance

2.5%Asset Income0.2%

9.2%

Pensions

21.7%

Social
Security

54.1%

Earnings

12.2%

^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

Figure 3. Sources of Individual Income, Third Quartile,
Age 65+
2007 Individual Income of $10,722 to $17,382
Public
AssistanceAsset Income
Other Income0.9%5.5%
Pensions1.3%

6.5%

Earnings

3.7%

Social
Security

82.1%

Figure 4. Sources of Individual Income, Bottom Quartile,
Age 65+

2007 Individual Income of Less Than $10,722
Public
Asset IncomeOther Income0.9%Assistance

3.9%6.6%

Pensions

2.5%

Earnings

1.5%

Social
Security

84.5%

^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

Figure 5. Sources of Household Income, Top Quartile,
Age 65+
2007 Household Income of More Than $56,973
Public
AssistanceOther Income
0.2%1.9%Social
Asset Income

19. 8% Sec urity15 . 6 %

Pensions

15.5%

Earnings

47.0%

Figure 6. Sources of Household Income, Second Quartile,
Age 65+

2007 Household Income of $29,730 to $56,973
Public
Assistance
Other Income0%
Asset Income3%

Social
P e ns i o ns Sec urity

21%43%

Earnings

25%

^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

Figure 7. Sources of Household Income, Third Quartile,
Age 65+
2007 Household Income of $16,244 to $29,730
Public
Other IncomeAssistance1%
Asset Income2%

Pensions

15%

Earnings
Social 9%
Security

67%

Figure 8. Sources of Household Income, Bottom Quartile,
Age 65+

2007 Household Income of Less Than $16,244
Public
AssistanceAsset Income
Other Income4%3%
1%Pensions

Earnings

Social
Security

84%

^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

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, whereas college graduates had a median
income of $34,593. The median income of married individuals aged 65 and older —
$18,448 — was $2,026 higher than the median income of single individuals aged 65
and older.
Figure 10 shows the median income of households in which either the
householder or the householder’s spouse was aged 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 aged 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.

Figure 9. Median Individual Income by Demographic Traits, 2007
^$1^6,⁴²²^No^t^M^a^r^rⁱ^e^d^rⁱ^t^a^l^at^us
^$^34,⁵⁹³^$1^8,⁴⁴⁸^Ma^r^rⁱ^e^d^Ma^S^t
^C^o^l^l^e^{ge G}^r^ad^uat^eⁱ^oⁿ
^$20^,⁴⁰⁰^S^o^m^e^C^o^lle^g^e^c^a^t
^$^15,⁹²²^Hⁱ^{gh S}^c^hoo^l^G^r^ad^du
^$1^2,²⁰⁰^Les^s^t^han^{12 y}^ear^s^E
^$1^1,⁷⁰⁸^Hⁱ^s^panⁱ^c^e
^$1^3,¹⁰⁴^Bl^a^c^k^ac
^$1^8,⁵³⁷^Whⁱ^t^e^R
^$1^3,⁸⁷⁷^Wo^m^eⁿ^e^x
^$^24,¹⁴²^Meⁿ^S
^$^15,⁶⁴⁸⁸⁰⁺
^$1^6,⁷²²⁷⁰^-⁷⁹^g^e
^$^21,⁸⁴¹⁶⁵^-⁶⁹^A
^$^17,³⁸²^Al^l^Al^l^ag^e⁶⁵⁺
^$-^$5,⁰⁰⁰^$¹⁰^,⁰⁰⁰^$15^,⁰⁰⁰^$^20,⁰⁰⁰^$^25,⁰⁰⁰^$^30,⁰⁰⁰^$^35,⁰⁰⁰
Figure 10. Median Household Income by Demographic Traits of
Householder, 2007

^$^19,⁷²²^N^o^t^M^a^rri^e^d^rⁱ^t^a^l^t^u^s
^$5^7,⁹⁴⁰^$4^5,⁰³⁶^M^a^rri^e^d^Ma^St^a
^C^o^l^l^e^g^e^G^r^adua^t^e^oⁿ
^$3^3,⁹⁸⁰^S^o^m^e^C^o^lle^g^e^atⁱ
^$^26,⁸⁸⁸^Hⁱ^gh^S^c^h^ool^G^r^a^d^duc
^$18^,²³⁰^Les^s^t^h^{an 12 y}^e^a^r^s^E
^$^23,⁴⁰⁰^Hⁱ^s^pani^c^e
^$21^,¹⁸⁴^Bl^a^c^k^ac
^$30,⁹⁷⁵^Whⁱ^t^e^R
^$23^,⁴⁰⁰^Wo^m^eⁿ^x
^$38,²²²^Meⁿ^S^e
^$20,⁹⁹⁵⁸⁰⁺
^$^28,⁷⁹⁷^70-⁷⁹^A^ge
^$43,¹⁵⁹^65-⁶⁹
^$29^,⁷³⁰^Al^l^All^ag^e⁶⁵⁺
^$-^$^10,⁰⁰⁰^$20,⁰⁰⁰^$^30,⁰⁰⁰^$40,⁰⁰⁰^$50,⁰⁰⁰^$^60,⁰⁰⁰
^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

Income from Retirement Benefits
Social Security
Retirement benefits from Social Security are the most common source of
income among Americans aged 65 and older. In 2007, Social Security paid benefits
to 86% of individuals aged 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 aged 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. Although 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.)

Table 3. Social Security as a Percentage of Individual Income
Among Recipients Aged 65 and Older in 2007
Percent of Income fromRecipients Percent of
Social Security(thousands)Recipients
Less than 10%8942.8
10% to 19%2,0576.5
20% to 29%2,138 6.8
30% to 39%2,2897.2
40% to 49%2,5748.2
50% to 59%2,487 7.9
60% to 69%2,1506.8
70% to 79%1,9926.3
80% to 89%2,1626.9
90% to 99%3,99212.6
100% of income8,82028.0
^Source:^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.
^No^te:^In^{2007, 31.6}^m^illion^{people ag}^{ed 65 or older receiv}^e^{d in}^com^e^f^r^om^{Social Secu}^rity^,^an^d^5.2
^m^illioⁿ^eld^e^r^l^y^p^e^o^p^l^{e h}^a^dⁿ^o^So^{cial Secu}^r^ityⁱⁿ^co^m^e^.
Table 4. Social Security as a Percentage of Household Income
Among Recipient Households of Those
Aged 65 and Older in 2007
Percent of Income fromHouseholds Percent of
Social Security(thousands)Households
Less than 10%7993.7
10% to 19%2,0449.5
20% to 29%2,0549.5
30% to 39%1,9659.1
40% to 49%1,9198.9
50% to 59%1,9439.0
60% to 69%1,7428.0
70% to 79%1,4776.8
80% to 89%1,4666.8
90% to 99%2,26010.5
100% of income3,93218.2
^Source:^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.
^No^te:^In^{2007, 21.6 m}^illion^h^o^u^s^eh^oldsⁱⁿ^w^h^ich^th^{e h}^o^u^s^eh^{older or th}^{e h}^o^u^s^eh^old’^s^s^pou^s^e^w^a^s⁶⁵
^o^r^o^l^d^e^r^receiv^e^d^So^cial^Secu^rity^,^an^d³^.⁹^m^illioⁿ^eld^e^rly^h^o^u^s^eh^o^l^d^s^h^a^dⁿ^o^So^{cial Secu}^rityⁱⁿ^co^m^e^.

Figure 11. Social Security Income of Individuals Aged 65+, 2007
³⁶^.⁰^%⁴⁰^%
³⁰^.⁴^%³⁵^%
³⁰^%⁺
^{e 65}
¹⁹^.⁸^%²⁵^%^s^A^g
²⁰^%ⁱ^en^t
ⁱ^p
¹⁵^%^f^R^e^c
^7.^1%^6.^7%¹⁰^%^%^o
^5%
^0%
^Les^s^t^h^an^$5^,⁰^{00 t}^o^$1^0,⁰⁰⁰^t^o^$1^5,⁰⁰⁰^t^o^$2^0,⁰⁰⁰⁺
^$5,⁰⁰⁰^$9^,⁹⁹⁹^$14^,⁹⁹⁹^$1^9,⁹⁹⁹
^Iⁿ^dⁱ^vi^d^u^a^l^Iⁿ^co^m^e^fr^o^m^S^o^ci^a^l^S^e^cu^rⁱ^t^yⁱⁿ²⁰⁰⁷
Figure 12. Social Security Income of Households Aged 65+, 2007

³⁵^%
^29.^3%^29.^9%
³⁰^%
⁺
²⁵^%⁶⁵
^20.8%^e
^Ag
¹⁶^.⁴^%²⁰^%^t^s
ⁱ^en
¹⁵^%^eci^p
^R
¹⁰^%^o^f
^%
^3.^7%^5%
^0%
^Le^s^s^t^han^$5,⁰^{00 t}^o^$10^,⁰⁰⁰^t^o^$1^5,⁰⁰^{0 t}^o^$^20,⁰⁰⁰⁺
^$5^,⁰⁰⁰^$9^,⁹⁹⁹^$14^,⁹⁹⁹^$1^9,⁹⁹⁹
^H^ous^e^hol^d^Iⁿ^c^o^m^e^f^r^om^S^o^cⁱ^a^l^S^e^c^u^rⁱ^t^yⁱⁿ²⁰⁰⁷
^Source:^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

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.

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 state 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 aged 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 aged 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; 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].

Figure 13. Individual Income from Pensions in 2007
³⁷^%^40%
^35%⁺
⁶⁵
^25%^30%^A^g^e
²³^%^25%^t^s
ⁱ^eⁿ
¹⁷^%¹⁶^%¹⁷^%^20%^e^cⁱ^p
¹⁵^%¹³^%
¹²^%^15%ⁱ^{on R}
^8%^9%^8%^10%^P^e^ns
^of
^5%^$
^0%
^L^e^{ss t}^h^aⁿ^$⁵^,0⁰⁰^to^$1^0,⁰⁰⁰^t^o^$1^5,⁰⁰⁰^t^o^$2^0,⁰⁰^{0 t}^o^$³⁰^,⁰⁰^{0 or}
^$5^,⁰⁰⁰^$9^,⁹⁹⁹^$1^4,⁹⁹⁹^$1^9,⁹⁹⁹^$29^,⁹⁹⁹^mo^r^e
^In^c^o^me^f^r^o^m^P^eⁿ^sⁱ^oⁿ^sⁱⁿ²⁰⁰⁷
^P^u^blⁱ^c^P^e^nsⁱ^oⁿ^s^Prⁱ^v^a^t^e^Peⁿ^sⁱ^oⁿ^s
Figure 14. Household Income from Pensions in 2007

⁴⁰^%
^35%
³⁵^%^A^g^e
^29%³⁰^%^ds
^e^hol
^22%²⁵^%^H^ous
ⁿ^t
^16%¹⁵^%^15%¹⁶^%²⁰^%^cⁱ^pi^e
¹³^%¹⁵^%^e
¹¹^%^10%ⁱ^{on R}
^9%^9%¹⁰^%^ns
^e
^P
^5%^%^of
^0%
^Le^s^s^t^h^an^$⁵^,⁰^{00 t}^o^$¹⁰^,0⁰⁰^to^$^15,⁰⁰^{0 t}^o^$^20,⁰⁰^{0 t}^o^$^30,⁰⁰^{0 or}
^$⁵^,⁰⁰⁰^$⁹^,⁹⁹⁹^$14^,⁹⁹⁹^$19^,⁹⁹⁹^$29^,⁹⁹⁹^mo^r^e
^H^o^us^e^h^o^l^{d I}ⁿ^c^o^me^f^r^om^P^e^nsⁱ^oⁿ^sⁱⁿ²⁰⁰⁷
^Pu^b^lⁱ^c^Peⁿ^sⁱ^oⁿ^s^P^rⁱ^v^at^{e P}^ensⁱ^o^ns
^Source:^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

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.

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 aged 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 aged 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 aged 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.

Figure 15. Percentage of Individuals Aged 65 and Older with Income
from Assets in 2007, by Total Individual Income
¹⁰⁰^%
⁸⁰^%
⁶⁰^%^op^l^e
^e
^P
⁴⁰^%^%^of
²⁰^%
^0%
^Le^s^s^t^h^aⁿ^$1^0,⁰⁰^{0 t}^o^$2^0,⁰⁰⁰^t^o^$3^0,⁰⁰⁰^t^o^$5^0,⁰⁰^{0 or}^m^o^r^e
^$1^0,⁰⁰⁰^$^19,⁹⁹⁹^$2^9,⁹⁹⁹^$^49,⁹⁹⁹
^To^t^a^l^Iⁿ^di^vⁱ^dua^l^Iⁿ^c^o^m^eⁱⁿ²⁰⁰⁷^f^r^om^A^l^l^S^o^ur^c^e^s
^Wⁱ^t^h^out^Iⁿ^c^o^m^e^f^r^om^A^s^s^e^t^s^Wⁱ^th^Iⁿ^c^o^m^e^f^r^o^m^As^s^e^ts
Figure 16. Percentage of Households Aged 65 and Older with
Income from Assets in 2007, by Total Household Income

¹⁰^0%
⁹⁰^%
⁸⁰^%
⁷⁰^%
⁶⁰^%^e
^opl
⁵⁰^%^f^P^e
⁴⁰^%^%^o
³⁰^%
²⁰^%
¹⁰^%
^0%
^Le^s^s^t^h^an^$1^0,⁰⁰^{0 t}^o^$2^0,⁰⁰^{0 t}^o^$3^0,⁰⁰⁰^t^o^$5^0,⁰⁰^{0 or}
^$1^0,⁰⁰⁰^$1^9,⁹⁹⁹^$2^9,⁹⁹⁹^$4^9,⁹⁹⁹^mo^r^e
^H^o^us^e^hol^{d I}ⁿ^c^o^m^eⁱⁿ²⁰⁰⁷^f^r^om^A^l^l^S^o^ur^c^e^s
^Wⁱ^th^o^u^{t I}ⁿ^c^o^m^e^f^r^o^m^As^s^e^t^s^Wⁱ^t^h^Iⁿ^c^o^m^e^f^r^o^m^As^s^e^ts
^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

Median income from assets also differed between the lower-income and higher-
income elderly. Among people aged 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 ofPercent
Total Income, 2007People (thousands)with AssetIncome Mean AssetIncome Median Asset Income
Less than $10,0007,89729.8$888$338
$10,000 to $19,99912,18444.61,947726
$20,000 to $29,9995,64762.63,7261,799
$30,000 to $39,0003,084 71.15,6182,280
$40,000 to $49,9991,77074.58,6114,000
$50,000 or more4,90382.626,32014,416
All persons with ¹⁰
any income 35,48553.2$8,265$1,585
Table 6. Income from Assets, Households 65 and Older, 2007
Number of Percent
Total Income, 2007Households(thousands)with AssetIncome Mean AssetIncome Median Asset Income
Less than $10,0002,21522.7% $814 $219
$10,000 to $19,9996,05839.8 1,355 400
$20,000 to $29,9994,41854.7 2,937 1,285
$30,000 to $39,0002,991 63.0 4,401 2,014
$40,000 to $49,9992,13365.4 6,116 2,844
$50,000 or more7,38479.4 24,584 9,000
All persons with ¹¹
any income 25,199 57.4 $11,869 $2,254
^Source:^Bot^h^t^a^bl^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

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.

Earned Income
Although 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 has¹²
been that more Americans have continued to work at older ages. 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. Although 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 aged 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 aged 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 aged 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.

Figure 17. Employment Rates by Age and Sex, March 2008
^73%⁸⁰^%
^63%⁷⁰^%
^52%⁶⁰^%
^41%⁵⁰^%^e^d
^33%⁴⁰^%^m^pl^oy
^26%³⁰^%^%^E
¹⁴^%²⁰^%
^8%¹⁰^%
^0%
^55-⁶¹⁶²^-⁶⁴⁶^5-6⁹⁷⁰⁺
^Ag^e
^Meⁿ^Wo^m^eⁿ
Figure 18. Earned Income, by Age, 2007

^100%
^90%
^80%
^70%
^60%
^rners
^50%^f^E^a
^40%^%^o
^30%
^20%
^10%
^0%
^A^g^{e 55-61}^A^{ge 62-64}^A^{ge 65}⁺
^L^e^s^s^t^han^$^10,⁰⁰⁰^$1^0,^{000 t}^o^$29^,⁹⁹⁹^$^30,⁰⁰^{0 t}^o^$4^9,⁹⁹⁹^$50^,⁰^{00 or m}^o^re
^Source:^Bot^h^fⁱ^g^u^r^es^f^r^om^C^R^S^an^al^y^sⁱ^s^of^t^h^{e March}²⁰⁰⁸^C^u^r^r^e^nt^Popul^atⁱ^{on Sur}^vey^.

Poverty
Poverty among the elderly has decreased dramatically over the past five decades.
In 1959, the poverty rate among Americans aged 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 aged 65 and older
had family incomes below the federal poverty threshold in 2007.¹⁴
Although 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 aged 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, although 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
aged 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 aged 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 aged 65 and older had family incomes between
100% and 149% of the poverty threshold. Also, whereas 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
[ ht t p: / / census.gov/ hhes/ www/ pover t y/ t hr e shl d/ t hr e sh07.ht ml ] .

Figure 19. Percentage of Individuals Aged 65 and Older
in Poverty, 2007

^16.^2%^No^t^M^a^rrⁱ^e^d^rⁱ^t^a^l^at^us
^4.^2%^Ma^r^r^ie^d^Ma^S^t
^4.³^%^C^o^l^l^{ege G}^r^aduat^eⁿ
^7.⁰^%^So^m^e^C^o^l^l^e^g^e^atⁱ^o
^9.⁰^%^Hⁱ^g^h^S^c^hool^G^r^ad^duc
^18.^0%^Les^s^t^h^{an 12}^y^ear^s^E
^17.^1%^Hⁱ^s^pani^c^e
^23.^3%^Bl^a^c^k^R^ac
^7.^4%^Whⁱ^t^e
¹²^.⁰^%^Wo^m^eⁿ^e^x
^6.⁶^%^Meⁿ^S
^11.^5%^{80 and up}
^9.^3%^{70 t}^o⁷⁹^A^ge
^8.^5%^{65 t}^o⁶⁹^l^e⁺
^9.^7%^Al^l^Al^Ag⁶⁵
^0.⁰^%^5.^0%¹⁰^.⁰^%¹⁵^.^0%^20.^0%²⁵^.⁰^%
Source: CRS analysis of the March 2008 Current Population Survey.
Conclusion
Americans aged 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, whereas 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 aged 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
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 aged 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.