APPENDIX E Income of the Aged in 1962: First Findings of the 1963 Survey of the Aged AMONG the richest persons in the United States, a few aged men and women are, of course, included. Yet families headed by a person aged 65 or over make up one-third of all families counted as poor in the 1964 Annual Report of the Council of Economic Advisers—a proportion much higher than the 1-in-7 frequency of aged families in the population. And the aged account for an even larger proportion of the adults living alone who are considered poor. The incidence of poverty among the aged would be immeasurably higher and its severity much greater were it not for old-age, survivors, and disability insurance (OASDI). Under this program, payments were made to 70 percent of the 172 million persons aged 65 and over at the end of 1962-four-fifths of the aged couples and more than three-fifths of all other persons aged 65 or older. Despite the large number of aged persons who now can count on OASDI benefits, many still live on very low incomes. The nonmarried-the widowed, the divorced, the separated, and the never married-together make up about half the population aged 65 and over. Their median income was $1,130 for the year 1962. For the married, who tend to be younger, the median income was $2,875. Almost 3 in every 10 couples had less than $2,000. Aged persons who work are, of course, likely to have more income than those who do not. Hence, among the nonmarried aged, who only rarely are in the labor force, those drawing OASDI benefits had the higher income. By contrast, among the married couples, who often had substantial earnings if they were not on the beneficiary rolls, it was the nonbeneficiaries who had higher median income. Benefits under OASDI were practically the sole source of cash income for almost one-fifth of the couples and for more than one-third of the nonmarried beneficiaries who had been entitled to benefits for a year or more. by LENORE A. EPSTEIN* Public assistance was important as a supplementary source of cash for 1 in 12 of the married couples and 1 in 6 of the nonmarried aged. The proportion receiving cash assistance payments was almost three times as large for nonbeneficiaries as for those on the OASDI rolls. Nonbeneficiaries past age 65 are a particularly diverse group. At one extreme are persons with full-time employment throughout the year-37 percent of the married men and 13 percent of the nonmarried men-many of whom earn as much as or more than they had when they were younger. At the other extreme are persons totally dependent on relatives, public assistance, or care in a public institution. They tend to be older than beneficiaries, whereas those with full-time employment tend to be younger. Although the great majority of the aged are at least partially retired, earnings still account for a sizable share of the income of the total aged population. In 1962, earnings accounted for 32 percent of the aggregate money income of all persons aged 65 and over and their spouses. Benefits under OASDI ran a close second to earnings as a proportion of their aggregate money income. Benefits from public and private retirement programs combined represented two-fifths of aggregate income. The aged received 15 percent of their income from interest, dividends, and rents. Public assistance and veterans' compensation accounted for the smallest proportion (5 percent and 4 percent, respectively). The foregoing findings are the first from the nationwide 1963 Survey of the Aged undertaken by the Social Security Administration, with the Bureau of the Census acting as its agent in collecting and tabulating the data. This Survey will provide data on the income of the aged and their work experience, health care costs, and hospital. utilization during 1962; their living arrangements, health insurance coverage, labor-force status, and assets and liabilities at the end of the year; and other aspects of their socio-economic status. The study is based on an area probability sample drawn to represent a cross section of per * Deputy Director, Division of Research and Statistics. sons aged 62 and over, as outlined in the brief note on source and reliability of the estimates at the end of this article. Interviews were completed in January and February 1963 for 7,500 units that is, married couples and nonmarried persons. The units contained more than 11,000 persons aged 62 and over -2,400 couples with head or wife aged 65 and over, 3,800 other persons of that age, and 1,300 units aged 62-64. The beneficiary status of respondents was verified by matching the sample against OASDI records, and selected data on beneficiaries were added to the Survey record. Comparable data are thus available for the first time on the economic and social situation of aged beneficiaries of the OASDI program and aged persons not receiving such benefits. Most of the Chart 1 data are presented for units as the most appropriate basis for analyzing income, expenses, and other aspects of the financial position of the aged. This article presents the early findings from the 1963 Survey on income sources and size of income of aged couples and nonmarried persons 62 or older. The first section provides summary figures for all those aged 65 and over and their spouses. The second section focuses attention on differences between beneficiary and nonbeneficiary units aged 65 and over. The third section relates to differences by age and includes information for the age group 62-64. Further details on income, employment, and assets, to be available in subsequent reports, will throw additional light on some of the findings reported here. The 1963 Survey of the Aged is unique in the SHARES OF AGGREGATE MONEY INCOME, BY SOURCE, OF PERSONS AGED 65 OR OVER*-1962 EARNINGS 32 % INTEREST, DIVIDENDS, RENTS 15% OTHER SOURCES 4% ASSISTANCE 5% *Including their spouses RETIREMENT BENEFITS Chart 2 SHARES OF AGGREGATE MONEY INCOME, BY SOURCE, OF MARRIED COUPLES AND NONMARRIED MEN AND WOMEN 65 OR OVER 1962 amount of information obtained on income sources. Because the type of income bears on its distribution by size and relative permanence and also the stability of its purchasing power, considerable attention is directed to the shares of aggregate income of the aged from various sources and the relative number of persons having some income from these sources. The second section of the article also suggests, for both beneficiary and nonbeneficiary units aged 65 and over, the effect on the size distribution of income of (1) the extent of employment in 1962, (2) the receipt of private pensions, and (3) the receipt of public assistance. The article concludes with a brief discussion of the implications of these new data for the economic outlook for the aged in the years ahead. THE POPULATION AGED 65 AND OVER Sources of Income In 1962 retirement programs provided twofifths of the aggregate income of persons aged 65 and over and their spouses. Of these programs, OASDI alone accounted for 30 percent of their income, programs for railroad and government workers about 6 percent, and rivate group pension plans slightly more than 3 percent (chart 1). It is perhaps surprising that an age group generally considered as out of the labor force had aggregate earnings four-fifths as large as their total benefits under public and private retirement programs combined. This relationship results in large part from the low ratio of retirement benefits to preretirement earnings that is characteristic of most retirement programs. Retirement benefits were reported by 84 percent of the couples and earned income by 55 percent (table 1). For the nonmarried persons the corresponding figures were 67 percent and 24 percent, with men somewhat more likely than women to have both current earnings and benefits based on earlier employment. More than 9 in every 10 of the units with payments under public or private retirement programs received OASDI benefits. Private group pensions went to more than 16 percent of the couples and 5 percent of the nonmarried persons, most of whom were also OASDI beneficiaries. About half the persons receiving payments as retirees or as survivors of workers in railroad or government employment also received OASDI benefits.1 Almost half the aggregate earnings of the aged was reported by couples and nonmarried persons aged 65-72 who were not on the OASDI rolls, although they represented only 14 percent of the units in the 65-and-over age group. Most of these workers could have drawn benefits had it not been for their employment. Nonbeneficiary units aged 73 or older, on the other hand, reported practically no earnings. Presumably they did not work because of health or other personal reasons or because no work was available to them. Of those whose benefits started in 1962, four-fifths of the men and two-fifths of the women had some earnings during the year, often for the period before they received benefits. As noted below, many whose OASDI benefits started before 1962 also had some earnings for men, almost as many of those aged 73 and over as of those aged 65–72. Their employment was likely to be occasional or part time. A not inconsiderable portion of the aggregate earnings of beneficiary units came from the employment of spouses who were not themselves entitled to OASDI benefits. Next in importance after OASDI and earnings as a source of funds for the aged was income from assets. Interest, dividends, and rents made up more 1 Preliminary analysis of the number of persons (as distinct from units) receiving income from various sources suggests that the proportion with private pensions and government employees' benefits should be somewhat larger than reported. Some persons may have reported their private pensions as private annuities, however. than 15 percent of the total money income in 1962 for persons aged 65 and over and their spouses. More than three-fifths of the couples and almost half the nonmarried reported some income of this type, but for about half of them it was less than $150 for the year. Income from assets is often underreported in household interview surveys of the general population. The many to whom it comes in only small amounts and infrequently may forget, and the few with large holdings do not always wish to divulge the magnitude. Because even small interest and dividend payments tend to be important, however, to those who have retired with small incomes, better-thanaverage reporting of asset income by the retired would be expected. In this Survey particular efforts were made to minimize underreporting. A self-enumeration form with questions about assets and income was left with each respondent to encourage reference to records, and it was checked later by a trained enumerator who returned to pick up the form and ask additional questions. In the final editing, if schedules showed an asset but no entry for income from that asset, a 4-percent return was imputed and recorded as cash income. One measure of the results of this effort to obtain accurate data on asset income may be the rise from 1959 to 1962 shown in the median total money income of nonmarried women-for whom asset income characteristically is of special importance when the 1963 Survey figure ($1,015) is compared with that from the 1960 Census of population ($670).2 Public assistance and veterans' programs, providing 5 percent and 4 percent, respectively, of the aggregate money income of persons aged 65 and over and their spouses, followed retirement benefits, earnings, and asset income in importance as an income source. If agency payments for medical care made directly to a hospital, nursing home, physician, or other vendor had been treated as cash income, the total for public assistance would have been about one-third larger, or somewhat more than 6 percent. Public assistance was reported more often by the nonmarried (17 percent) than the married (8 percent). The reverse was true of veterans' compensation and pension payments, which more often go to men than to women, although many widows do receive such benefits. 2 See page 22 for a comparison of the median incomes of other aged persons. Cash contributions by relatives not living in the same household, or by friends, amounted to barely 1 percent of the aggregate income. Only 3 percent of the couples and 5 percent of the nonmarried reported cash contributions, even though occasional contributions as well as those received regularly were included." Relatives may provide support by sharing a home or paying bills, as well as by cash contributions. A precise money value cannot be placed on the advantage of sharing a home. Yet more than one-fourth of the couples and more than two-fifths of the nonmarried aged were members of a household with children or other relatives present. For more than half these couples and almost one-fourth of the nonmarried who shared a home, nonmarried children were the only relatives in the home. In other words, there was a normal family situation, with a good chance that the older unit was contributing as well as receiving. In contrast, when the home is shared with married children, siblings, or other relatives, the support may go either way but is likely to favor the aged. Later tabulations will not only compare the income of those who share a home with relatives and the income of those living by themselves, but they will relate the income of the aged who share to the income of the entire family. The extent to which relatives help with medical care bills will also become clear later, when medical care costs and the means of meeting them are analyzed. In summary, it may be noted that about 46 percent of the total income of couples and nonmarried persons aged 65 and over came from public income-maintenance programs social insurance, veterans', and public assistance programs. (Although information is not available on the exact amount received in the form of unemployment and temporary disability insurance or workmen's compensation, it is estimated that it was not more than 1 percent.) Nearly 90 percent of the couples and 80 percent of the nonmarried had some income from a public income-maintenance program. If about one-half million nonmarried persons who 3 Current money income excluded lump-sum inheritances and large cash gifts as well as lump-sum payments from life insurance, tax refunds, awards for injury or damage, and proceeds from the sale of a car or other large item. Any income obtained from investment of the proceeds, however, is included. Information on the amount of such receipts will be available later. |