Where Do Older Americans Get Their Money?

While older Americans depend heavily on Social Security for income, the  percentage of those 65 and older dependent on earned income, or employment,  has increased in the past decade, according to a new report published by the  AARP Public Policy Institute.

AARP’s “Sources of Income for Older Persons” report, by Ke Bin Wu, looks at  the different ways people age 65 and older support themselves. The 2008 report found that 34.8 million people age 65 and older (96.6 percent of the older population) had income during the year 2006, with a mean of $26,878.

More than 86 percent of these individuals received Social Security income, with a mean of $11,723 annually. About 31 percent had income from pensions and retirement savings.

The third most common income source for older Americans was interest from personal savings, but although 50.6 percent reported receiving this type of income, the individual earnings were quite low (a median of $978 annually).

Earnings income made up one of the least common forms of income for those 65-plus, but still came in at 18.6 percent, or about 6.7 million people. The median income from this source was $19,250, while the mean was $33,758.

Earned income now makes up 24.2 percent of aggregate income for those 65-plus, up from 17.5 percent in 1996. In contrast, aggregate Social Security income over this period has only changed 3 percent (39 percent in 2006, down from 42 percent in 1996).

Less than 3 percent received Supplemental Security Income, a federal income supplement funded by general tax revenues (not Social Security taxes), and about the same percentage received income from veterans’ benefits. Seven percent received asset income‹money earned from rents, royalties, estates and trusts‹although this number was down from its peak in the late 1990s.

Some discrepancies in types of income received were found in different gender and ethnic groups. For instance, about 33 percent of whites received income from retirement pensions and savings while 13.9 percent of Hispanics did; and 56.8 percent of whites received some sort of income from interest, while this number dropped to 22.7 percent for blacks and 20.4 percent for Hispanics.

Men were twice as likely as women to have income from pensions and retirement savings, and men’s median retirement income ($12,334) was almost twice that of women’s ($6,804). “These differences were due to the fact that women had lower labor force participation and were more likely to have low-wage jobs,” Wu wrote.

The data in the report were drawn from the March 2007 Current Population Survey.

Elizabeth N. Brown is an assistant editor at AARP Bulletin Today.