Poverty Among the Elderly: Where are the Holes in the Safety Net?

Abstract

Using data from the longitudinal retirement history survey (RHS), we examine the economic status of the cohort of the elderly who were 68 -73 years old by 1979 to see who fell through the safety net in the 1970s. Our most important finding is that a non-trivial fraction of the elderly in the age/vintage group we study either remained poor, became poor, or had very low replacement rates in terms of their total income. This occurred despite the enormous general improvement of the economic status of the elderly, part of which was made possible by very large increases in real Social Security benefits. Examination of the characteristics of those who fell through the safety net reveal that females, especially widows, were the most likely candidates for economic difficulty in this cohort in this stage of their life. We also note a sharp difference in realizations of retirement income expectations among those who were poor and/or had low replacement rates relative to those who were well off and/or had high replacement rates. Both groups received substantially more Social Security benefits than expected, whereas those with (ex post) low replacement rates received less in pensions and continued earnings than they had expected while those with high replacement rates received more than expected.