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Use of potential income other than the home equity would still leave more than a third of the aged couples and about two-thirds of the nonmarried aged with insufficient income to live independently at the BLS "modest but adequate" budget standards for that period.

INCOME NEEDS

The fact that older people have lower incomes than younger persons is not in itself proof that these incomes are inadequate. Nor is the fact that older people spend considerably less than younger people proof that their needs are that much less.

Older persons have lesser needs for some items, such as clothing. For those who are retired, work-related expenses-for example, costs of transportation to and from the job, meals away from home, social security taxes and union dues are either completely eliminated or sharply reduced. The cost of raising and educating children-an expenditure that for years dominates most family budgets-is also usually ended. Furthermore, since they are more likely than younger persons to own their homes free and clear, they may be able to stretch a given income further than those who must pay rent or are still making payments on the mortgage. Their age entitles them to income tax benefits not available to those who have not yet reached age 65. On the other hand, their medical expenses are considerably higher than those of younger people. They can do less for themselves as physical ability decreases and may therefore have to incur higher expenses for maintaining the home if they live independently or for various forms of institutional care. Because they have more free time, their recreational costs could be higher.

According to the best expenditure data available, older people who have about half the income of the younger-also spend about half as much as do younger people. However, the proportions of their total expenditures going to various types of goods and services differ considerably. Older consumers followed a pattern similar to low-income groups in general. For instance, the older units spend proportionately more on food, housing, household operation, and medical care than do the younger units.

Smaller expenditures by older consumers in many categories reflect their low-income position rather than lack of need for the goods or services. A recent survey showed that 84 percent of the households headed by younger persons owned an automobile but only 56 percent of the older households. Moreover, older households tended to own older automobiles. But if younger and older households at the same income level were compared, most of the differences disappeared. This survey also checked on ownership of major appliances such as washing machines and dryers, refrigerators, TV sets, dishwashers, air conditioners, etc. In every category except refrigerators, a significantly lower proportion of older households than of younger households reported owning such appliances.

One measure commonly used in assessing the adequacy of incomes to meet needs is the BLS Retired Couple's Budget for a moderate living standard. For the majority of the aged population, even this "moderate" level is well beyond their means.

A moderate standard of living for a self-supporting, retired couple in U.S. urban areas in the autumn of 1966 required an annual expenditure of $3,869. (Retired Couple's Budget for a Moderate Living Standard, U.S. Department of Labor, Bureau of Labor Statistics, Bulletin No. 1570-4.)

The couple was defined in the Bureau of Labor Statistics study as a husband, age 65 or older, and his wife, self-supporting, living independently, enjoying fairly good health, receiving hospital and medical care protection under Medicare, and occupying a mortgage-free home. In 1966, there were 4.2 million elderly husband-wife couples not on farms. How many had to make do on less than $3,869 is not yet known. Two out of five of them (1.9 million) had less than $2,675 for the year. Obviously then, the majority would find the level BLS designates as "moderate" well beyond their means.

Indeed, among all families with an elderly head (including those with three or more members, units generally better off than elderly couples because of the income added by young employed adults), median income in 1966, as reported to the Bureau of the Census, was 6 percent lower than the BLS-priced budget. (Social Security Bulletin, October 1968, p. 3.)

Although no budget designed specifically for elderly persons without a spouse has been priced by BLS, an equivalence scale developed by the Bureau suggests that an elderly person living alone in a city would need about $2,130. Again, the number who had less than this amount is not known, but as many as two-thirds of all aged unrelated individuals not on farms had incomes below $1,900 in 1966.

The average social security benefit payable to an elderly couple who retired in December 1950-even though adjusted over the years would now purchase a significantly smaller fraction of the Budget than at the time of retirement (Chart A).

Another measure of the inadequacy of the incomes of older people is in the large numbers with income below the poverty line as defined by the Social Security Administration.3 Persons aged 65 and over continue to have a higher poverty rate than any other age group.

Three out of every 10 people 65 and older-in contrast to one in nine younger people were living below the poverty line in 1966. Another one-tenth of the aged population was on the border of poverty. Nearly two-thirds of the aged poor are women.

Widows and other aged women living alone are particularly disadvantaged.

Six out of every 10 of them have incomes below the poverty line. In fact, the number of poor women living alone has actually increased over the years from 1.8 million in 1959 to 2.1 million in 1966-a reflection of the increasing number who live independently even at the price of poverty (table 4 and Chart B).

The measure used as counting the aged as poor in 1966 was $1,975 for an elderly couple not on a farm and $1,565 for an aged person alone. The amounts used in classifying aged persons as "near poor" were $2,675 for a couple and $1,900 for unrelated individuals.

TABLE 4.-Trends in Poverty: Percent of Persons with Income below the SSA Poverty Index, by Age, 1959 to 1966

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Source: Derived by the Social Security Administration from special_tabulations by the Bureau of the Census from the Current Population Survey. (U.S. Joint Economic Committee Compendium, part II, p. 188.)

That persons aged 65 or older continue to have a higher poverty rate than any other age group is especially significant in the light of the greater emphasis in public programs on providing income in old age than at earlier stages.

The number of aged counted as poor in 1966 numbered 5.4 million, the same number as the count of aged poor two years earlier, and only half a million less than the count in 1959. In 1966, the 1.2 million aged couples in poverty represented one in five of all families counted poor; in 1959, these couples had accounted for only one in six of the total. While the financial fate of the aged living alone in 1966 was better than it once had been, it still spelled poverty for the majority (55 percent).

As compared with the situation in 1959 when aged unrelated individuals accounted for fewer than one-fifth of all households tagged poor, in 1966 every fourth household in poverty was that of an aged person living alone.

Again, this highlights the problem of the aged widow and other unrelated women. In 1959, there were 2.6 million of them, 1.8 million (71.5 percent) of whom were below the SSA Poverty Index. By 1966, the number of such persons had increased to 3.6 million, and the 2.1 million who were poor represented 59.3 percent of this larger group. Two out of every five couples and two out of every three individuals had incomes below the "near poor" level in 1966.

Data are not yet available to show the effects of the 1967 Social Security amendments in reducing the proportion of aged people who live in poverty. At the time the amendments were enacted, it was estimated that 800,000 older persons would be moved out of poverty by the benefit increases to begin as of February 1968.

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PART THREE

INCOME OF TODAY'S AGED IN PERSPECTIVE

In relation to the younger population, the median income of the older population has dropped in recent years. The median income of families with an aged head dropped from 50.6 percent of the median of younger families in 1962 to 46.2 percent in 1967. The decline for older unrelated individuals has been even sharper, from 47.2 percent in 1962 to 40.5 percent in 1967 (table 5 and Chart C).

TABLE 5.-Trend in Median Money Income of Families and Unrelated Individuals, 1960-671

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Source: Bureau of the Census, as supplied by the Administration on Aging, Social and Rehabilitation Service, Department of Health, Education, and Welfare, January 1969.

In relation to the income a given older person had before retirement, he has suffered a substantial drop.

One study finds that the ratio of retirement income to income for the year before retirement was only one-quarter or less for one-third of the retirees.1

1 See p. 236 of Part II, U.S. Joint Economic Committee Compendium.

The U.S. Joint Economic Committee Compendium to which reference is made throughout this Report is "Old Age Income Assurance", A Compendium of Papers on Problems and Policy Issues in the Public and Private Pension System, submitted to the Subcommittee on Fiscal Policy of the Joint Economic Committee, Congress of the United States, December 1967; Part I: General Policy Guidelines, Part II: The Aged Population and Retirement Income Programs, Part III: Public Programs, Part IV: Employment Aspects of Pension Plans, Part V: Financial Aspects of Pension Plans, and Part VI: Abstracts of the Papers.

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