Chapter 13 - Economic Status of the Aged in the United States

Abstract

This chapter provides an overview of the economic status of the elderly in the US. It compares older and younger Americans in terms of median household incomes and poverty over time, and then considers how updated measures of poverty affect conclusions about the economic well-being of older Americans. It then examines the roles of particular sources of income—social security, pensions, earnings, and asset income—in supporting older Americans today. Prospects for the economic well-being of retirees in the future are reviewed drawing on a retirement risk index developed by the Retirement Research. Social security is designed to provide a foundation of retirement income that will be supplemented by pensions and savings. It has a progressive benefit formula that replaces a larger share of past earnings for low earners than for high earners. Asset holdings are an increasingly important component of economic security for seniors as more retirement plans take the form of individual savings accounts rather than contractual benefit promises from employers. This chapter also examines the retirement savings account accumulations of working households, the role of homeownership, and the net worth of US households based on the most recent findings of the 2007 SCF. The US faces a modest financial challenge to ensure that scheduled Social security benefits will be maintained (or even improved) in the long-term future. The recent financial crisis exposes the vulnerability of American workers and retirees to losses in private sector savings, pensions, home equity, and employment earnings. Those losses shed a bright light on the critical importance of ensuring an adequate foundation of economic security through social insurance.