Resources supplementing income A common question is whether it is either appropriate or realistic to judge the economic well-being of aged persons solely in terms of current money income. If the aged had saved before retirement, it is argued, they should draw on those savings. But the vast majority of the aged have only modest holdings. They either found it impossible to put much aside during their working years, or they used up retirement savings for emergencies, for educating their children, or to help out when their children established homes and started their own families. Homeownership (farm and nonfarm) at the end of 1962 was reported by three-fourths of the couples with head or wife aged 65 or over and by more than two-fifths of the nonmarried aged, beneficiaries and nonbeneficiaries alike. (Information is not yet available on the proportion having full title to their home; in 1957 for beneficiary units it was about 80 percent of the owners.) According to preliminary data from the 1963 Survey of the Aged, the value of all assets (including real property) other than the home amounted to less than $1,000 for two-fifths of the aged couple. Likewise, more than one-half of the nonmarried aged beneficiaries and more than three-fifths of the other nonmarried persons aged 65 and over had less than $1,000 in total assets other than an owned home. Only about 30 percent of the couples had holdings worth $10,000 or more, and an even smaller proportion of the nonmarried had as much as $5,000. Even fewer of the aged units had financial assets (including all types of savings and checking accounts, stocks, bonds, and money loaned to others but not real property) that could readily be drawn on in an emergency or for current living. Of the beneficiary couples, for example, nearly half had less than $1,000 in financial assets at the end of 1962 and barely one-fifth had $10,000 or more (chart 5). Of the nonmarried beneficiaries, about half reported financial assets of less than $500 and roughly one-fifth had $5,000 or more. Nonmarried persons not entitled to OASDI benefits had even less. BENEFICIARY UNITS 65 AND OVER WITH LESS THAN SPECIFIED AMOUNTS OF FINANCIAL ASSETS" AT END OF 1962 AMOUNT OF FINANCIAL ASSETS Received First Benefit Before Start of Year 1/Includes Savings and Checking Accounts, Stocks, Bonds, Money Loaned to Others Even though some income in the form of interest, dividends, or rents accrued to a substantial proportion of the aged, in many cases the amounts were very small. (Information will be available later on the size distribution of income in this form.) Moreover, those most in need of a supplement to current income are least likely to have assets on which they can draw to provide such a supplement. Chart 6 shows the inverse correlation when beneficiary units are classified in three groups on the basis of current income. Of the beneficiary couples in the lowest third of the income range, about three-fifths had less than $500 in financial assets; of those in the middle third, about two-fifths had so little (chart 6). Only 5 percent of the couples in the lowest third and 15 percent of those in the middle third had $10,000 or more in financial assets. For those with only a few years of life left, $10,000, or even $3,000, would contribute greatly to ease of living, but for those with 10, 15, or even 20 years ahead, even $10,000 would -do little. BENEFICIARY COUPLES 65 AND OVER BY AMOUNT OF FINANCIAL ASSETS AT END OF 1962, BY INCOME THIRDS Percent 100 80 60 40 20 Percent 0 0 INCOME TERCILE GROUPS 1/Includes Savings and Checking Accounts, Stocks, Bonds, Meney Leaned to Others Received First Benefit Before Start of Year Some refinements in interpretation of these figures must await further analysis of the survey data on income and assets. Account will be taken of the additional resources that might be currently available to the aged if it were assumed that they could prorate their assets over the years of life remaining to them. AGE DIFFERENCES IN INCOME Much of the disparity in income position between beneficiary and nonbeneficiary units or between the married and nonmarried as a group has been attributed to a difference in age distribution. Age is, of course, associated in turn with the extent of labor-force participation. The differences between the income situation of the group aged 65-72 and of that aged 73 and over are discussed in the following paragraphs. The comparison also takes in the group aged 62-64-not discussed earlier in this article. Persons in this age group are eligible for OASDI benefits, but the amount of the benefit is actuarially reduced, except for widows and disabled workers, for each month before attainment of age 65 for which a benefit is drawn. The maximum reduction is 20 percent for retired workers and 25 percent for wives. The 65-and-over population was classified in only two age groups so that the sample would be adequate in size when further cross-classified by marital and benefit status and, for the nonmarried, by sex. The rather unorthodox breaking point divides the aged population roughly in two, with 46 percent of the total in the older group. It was used because the retirement test under the Social Security Act no longer applies after the beneficiary reaches age 72. With respondents classified by age as of birthday in 1962, only those aged 73 and over would have been eligible for full OASDI benefits regardless of their earnings throughout the 1962 survey year. Three-fifths of the couples were in the age group 65-72, but almost three-fifths of the nonmarried (56 percent) were aged 73 or older (table 9). Relatively more nonbeneficiary than beneficiary couples were in the younger age group (72 percent compared with 59 percent). For nonmarried men, the difference between beneficiaries and nonbeneficiaries was insignificant, with slightly less than half under age 73. Among the women, however, half of those with OASDI benefits but only a third of the nonbeneficiaries were under age 73. TABLE 9.-Age and OASDI beneficiary status for units aged 65 and over: Percentage distribution by beneficiary status and by age group, 1962 1 1 Median incomes were smaller for the 73-and-over group than for the 65-72 age group, for each marital and beneficiary status classification, but the disparity was substantial only for couples and nonmarried men not on the OASDI rolls: $4,750 compared with $1,680 for couples, and $2,000 compared with $860 for the men without wives (table 10 and charts 7 and 8). These figures clearly reflect the fact that employment provided three-fourths of the income of the younger nonbeneficiary couples but only 18 percent for the older ones; the corresponding figures for the nonmarried men were two-thirds and 9 percent (table 11). Presumably most of the younger workers could have drawn OASDI benefits were it not for their employment, but those aged 73 and over were apparently not eligible. TABLE 10.-Size of money income by age and OASDI beneficiary status for units aged 62 and over: Percentage distribution by income interval, 1962 1 1 1 Excludes beneficiaries who received their 1st benefit in February 1962 or later. With at least 1 member aged 62 or over. The retired women receive benefits based on their own wage record, regardless of eligibility as widows; the widowed receive benefits based on the husband's wage record. 4 Less than 0.5 percent. |