TABLE 2-9.-MEDIAN FAMILY INCOME, 1965-85, ELDERLY AND NONELDERLY FAMILIES-Continued

Source: U.S. Bureau of the Census, Current Population Reports, Series P-60, 1965–85.

Poverty rates showed a similar trend. The poverty rate among the elderly remained fairly stable throughout the 1970's and early 1980's-ranging between 14 to 15.7 percent. At the same time, the poverty rate among nonelderly adults rose dramatically from a low of 8.5 percent in 1974 to a high of 12.3 percent in 1982. (See table 2-8.)

With the economic recovery of the last few years, income trends have shown a marked change in the pattern set in the late 1970's and early 1980's. Since 1982, wage earners have realized real gains paralleling those of the elderly. The median income of families with a head 65 and older rose slightly in constant (1985) dollar terms from $17,963 in 1982 to $19,117 in 1985, while the median income of families with a head under 65 also increased from $28,980 in 1982 to $30,504 in 1985. At the same time, poverty rates have declined for both the elderly and nonelderly adults. The poverty rate among those 65 and older has declined from 14.6 percent in 1982 to 12.6 percent in 1985, while the poverty rate among adults age 18 to 64 has declined from 12.3 percent in 1982 to 11.3 percent in 1985.

H. COMPOSITION OF INCOME

THE ELDERLY RELY HEAVILY ON SOCIAL SECURITY BENEFITS AND

ASSET INCOME

The elderly depend more heavily on Social Security for their income than they do on any other source. In 1984, 38 percent of all income received by aged units came from Social Security.3 Nine out of every 10 aged units was receiving some income from Social Security, and 13 percent of the aged units received all of their income from Social Security. In all, 3 aged units in 10 (29 percent) depended on Social Security for 80 percent or more of their income. The elderly with the lowest incomes were the most dependent on Social Security benefits. In 1984, 77 percent of aggregate income received by aged units with incomes under $5,000 came from Social Security benefits. By contrast, only 20 percent of the aggregate income received by aged units with incomes of $20,000 or more came from Social Security.

3 Information in section H about the income of aged units in 1984 comes from Susan Grad, Income of the Population 65 and Over, 1984, U.S. Department of Health and Human Services, Social Security Administration. An aged unit is either a married couple living together with one or both members 65 or older, or an individual 65 or older who does not live with a spouse. Income is measured separately from the income of the family or household in which the unit lives.

CHART 2-9

SHARES OF INCOME BY SOURCE

COUPLES AND UNMARRIED PERSONS AGED 65 AND OLDER

SOURCE: Grad, Susan, Income of the Population 55 and Over, 1984, Social Security Administration, forthcoming

Income from assets was the second most important income source for the elderly. In 1984, 28 percent of the income received by aged units was income from assets. In recent years, savings and other asset income has grown in importance as a source of income, increasing from 16 percent of total income in 1962 to 22 percent by 1980. However, income from financial assets was unevenly distributed, with nearly one-third (32 percent) of the aged units reporting no asset income, and one-fourth (27 percent) of those with asset income reporting less than $500 a year. Only 33 percent of those who had asset income received more than $5,000 a year from this

source.

Earnings were a particularly important source of income to the younger elderly, but declined in importance with age. Overall, 16 percent of the income of aged units came from earnings. Those aged 65 to 69 received 28 percent of their income from earnings, compared to only 4 percent for those aged 80 and older.

Employee pensions provided 15 percent of the income the elderly received. This share has remained fairly constant in recent years, and is similar for all but the oldest age group. Overall, three in eight (38 percent) aged units received income from public and/or

private pension benefits-one in four (24 percent) from private pensions.

I. TRENDS IN COMPOSITION OF INCOME

SOCIAL SECURITY IS BECOMING AN INCREASINGLY IMPORTANT PART OF THE INCOME OF THE ELDERLY, WHILE EARNINGS CONTINUE To DECLINE IN IMPORTANCE

The rapid growth in real benefit levels for the elderly during the late sixties and early seventies was accompanied by a substantial change in the composition of income the elderly received. In the late 1960's, families with heads 65 and older derived nearly half of their income from earnings, while only 23 percent of their income came from Social Security. Now, 20 years later, Social Security has surpassed earnings as the leading source of income for these families.

50.

40

SOURCE: U.S. Bureau of the Census, Current Population Surveys, 1968-85, Unpublished data.

CHART 2-11

INCOME SHARES BY SOURCE OF INCOME

UNRELATED INDIVIDUALS 65+

1968 - 1985

Social Security/RR Retirement

SOURCE: U.S. Bureau of the Census, Current Population Surveys, 1966-85, Unpublished data.

TABLE 2-10.-SOURCE OF INCOME AS A PERCENTAGE OF INCOME, 1968-85

4

A substantial decline in the role of earnings has been the most notable feature of this change. The trend toward earlier retirement among older males has caused labor force participation rates of men 65 and older to drop from 33 percent in 1960 to 16 percent in 1985. As a result, earnings, which accounted for 48 percent of elderly family income in 1968, accounted for only 29 percent by 1985. Social Security grew in importance as a source of income to elderly families between 1968 and 1974, but its proportion of sources of income has remained relatively stable since then. The proportion of elderly family income coming from Social Security benefits increases from 23 percent in 1968 to 31 percent in 1974, largely as a result of legislated benefit increases in the late 1960's and early 1970's. Over the last 10 years, however, the proportion of elderly family income coming from Social Security has ranged between 32 and 34 percent. In recent years, a particularly steep decline in the role of earnings has been offset by an increase in the role of assets and pensions as a source of income. This shift was most pronounced between 1978 and 1980, when earnings dropped from 37 to 31 percent while assets increased from 16 to 19 percent and pensions grew from 14 to 16 percent of total income.

U.S. Department of Labor, Bureau of Labor Statistics.