INCOME SOURCES FOR OLDER ADULTS

1. INCOME SOURCES FOR OLDER ADULTS Mary C. Sengstock, Ph.D, C.C.S. Professor of Sociology Wayne State University

2. Introduction: Sources of Income 3 Major Income Sources for Older Adults • Social Security • Pensions • Savings and Assets

3. Brief Facts About Income After 65 • Major U.S. Basis for Financial Security in Later Life: SOCIAL SECURITY & MEDICARE • Provides Financial Security for Elders • Relieves Pressure on Their Children & Grandchildren

4. Social Security • Received by 34M+ Retired Workers • Average Per Recipient: $14,100/Year • Dependent for All or Most of Income: 23% • In Poverty w/o Social Security: 36% (2008) • Reducing Social Security – Choice • Food & Medicine? Or Rent & Heat?

5. Medicare • Health Care Coverage: • Source for 95% of Seniors • Approximately 37 M in 2008 • Without Medicare: • Most Would Be Forced to Purchase Expensive Individual Private Policies

6. Social Security • 95% of Older Adults Get Social Security Benefits • Mean Social Security Benefit: • $895/Mo – $9,204/Yr • Makes Up 40% of Total Income for the Older Adult Population • For 65% of Older Adults, Social Security Constitutes 50% of Their Income • For 18%, Social Security Is Their Only Income

7. Plan for Social Security • Never Intended to Be Sole Source Of Income For Elderly • Supposed to Serve as the “Floor” • To Be Supplemented by Pensions, Savings • Many Workers Lack Resources During Working Years to Develop Other Sources • Especially True of Poorest Workers • 85% of Poorest Elders Have Only Soc Sec

8. Social Security Eligibility • Employed At Least 10 Years • In a Job Which Was “Covered” By Social Security (I.e., Paid Soc Sec Tax) • Monthly Benefits Based on Average Earnings in Soc Sec Covered Jobs • Reduced Benefits Available @ 62.5 • Reduction is Permanent • Full Benefits @ 65 (to Increase to 67 by 2027)

9. Taxable Social Security • Social Security Beneficiaries Over 65 Can Receive Benefits Even if Working • High Income Workers Pay Income Tax on Up to 50% of Social Security Income • Tax Applies Only to EARNED Income • Wages – Salary • Does Not Apply to Pensions, Stock, Interest, Etc.

10. Funding Social Security System • 12.4% Tax On Wages And Salaries • … Up to The “Cap” • Higher Income Workers Do Not Pay Social Security Tax On Their Full Income • “Cap” in 2007 Is $97,500 • Low Income Workers Pay on Their Entire Income

11. Social Security – Bankrupt? • Widely Debated • Possible Solutions: • Have Workers Pay On Entire Income (or a Higher “Cap”) • Hold Federal Government Responsible For Constant “Borrowing” From Social Security Taxes – a Pattern Since the Beginning

12. Pensions – Who Has Them? • Depends on Work History: • Work for Company with Pension Plan • Work in a Job the Pension Covers • Worked long Enough for the Pension to “Vest” (usually 10 years) • Company does Not Sell Out!

13. Pension Survivor Benefitsfor Dependents • Wives Get Survivor Benefits ONLY If: • Husband Lived to Retire • Wife Remains Married to the Retiree • Husband is Willing to Accept Reduced Benefits So Wife Gets Survivor Benefits • ERISA: Bill Required that Wife Sign Off • Q: Is the Sign-Off Free? …Knowledgeable? • No Such Protection for State Plans

14. Medicare • 1965 Amendment to Social Security Act • Compromise with Medical Profession re Comprehensive Health Insurance

15. What Medicare Does • Covers <50% of Older Adults’ Health Expenses • Remainder: Supplemental Insurance; Out of Pocket; Veteran’s Administration; Medicaid • Mean Cost of Older Adults’ Health Care 4X that of Younger Adults

16. New Medicare Prescription Drug Coverage • Pays a Portion of Older Adults’ Prescription Drugs • Highly Debated: • Claim of Control by Drug Companies • Some Consider Inadequate – Opposed by Democrats, Unions • AARP Supported – Many Members Quit

17. Causes of Increased Health Costs • Success of Modern Medical Care • Medical Bias Toward Acute Care • Poor Fit of Medical Care with Older Adults’ Chronic Health Needs • Lack of Coordination of Acute and Chronic Care Needs

18. Medicare’s Poor Fit with Needs of Target Population • <29% of Medicare Budget for Long Term Care • Increased Payments for Home Care – in Order to get Earlier Discharges • Only Pays for SHORT TERM Recovery – Not Chronic Care • Technical Care Approaches Inappropriate for Untrained Caregivers • DRGs Encourage Cheap Care Plans

19. Special Problems of Older Women • Women >65 Are Nearly ¾ of Elderly Poor • 13% of Older Women Are in “Poverty” • “Poverty” – U.S. Census Definition: • Single Adult <65: $9,359 • Single Adult >65: $8,628 • Assumption: Food & Necessities Are Less for Older Adults

20. Older Women’s Income • Less Than Men’s Pre & Post Retirement • Post Retirement: • Men: Mean=$29K Women: Mean=$15K • Marriage, Children Shorter/No Work Life • Lower Wage Jobs • Jobs Not Covered by Social Security • Income Peaks @ 44 (vs 55 for Men) • Small or No Pensions (Jobs Not Covered) • Women Live Longer – Savings Run Out

21. Social Security for Women • Mean Years Worked for Maximum Benefits = 35 yrs • Mean Years Worked for Women = 11 yrs • Most Receive Dependent Benefits Under Husband • Spousal Benefits Are and Remain Less (1/2 of Primary Beneficiary’s) • Most Retire Early with Older Husbands • Women Still Encouraged Not to Work

22. Delaying Social Security • Workers Can Increase Benefits By Delaying Benefits Past 65 • Credit for Each Month Past 65 Not Retired • Widows Dependent on Benefits Under Husband Do Not Have this Opportunity

23. Older Women & Pensions • Few Older Women Have Their Own Pensions: • Never Worked in a Job with Pension Coverage • Didn’t Work Long Enough to Have One • May Not Have Husband’s Pension Either: • He May Not Have Lived to Retire • He May Not Have Selected Survivor Benefits

24. Older Widows & Savings • Older Widows Are Especially Poor • Couples Must “Spend Down” to Provide for Husband’s Final Illness Expenses • All Savings Are Used Up – Nothing Is Left for Her After He Dies: • Neither Pension Nor Savings

25. Special Problems of Divorced Women • Can Now Get Benefits Under Former Husband’s Social Security – IF: • Marriage Lasted at Least 10 Years • Ex-Husband is at Least 62 • Ex-Husband is Receiving Social Security If She is Older Than He, or if He Has Not Yet Retired, She Must Wait – Which Can Create Financial Difficulty

26. Summary of the Financial Status of Older Women • Women Who Did What Society Required: • Stay Home; Don’t Work • Care for Husband & Children • Depend on Husband • Are at Great Risk in Old Age: • No Pension • Lower Social Security • DESTITUTE! • Policy That People Must Earn Their Keep!

27. Summary of Older Adults’Financial Status • 3-Legged Stool of Old Age Security: Social Security, Pensions, & Savings • Most Older Adults Depend Heavily on Social Security • Medicare Is the Main Health Insurance Plan for Older Adults • Medicare Is Not Effective in Covering Their Most Important Health Needs: Chronic Disease & Long Term Care

28. Suggested Policy Changes: Financial • Do NOT Privatize Social Security • Apply Social Security Tax to ALL Wages – or Set a Much Higher Cap • Income Tax on Social Security Benefits Should Apply to ALL Income – Not Just Wages • Apply Those Dollars to Social Security

29. Suggested Policy Changes: Medical • De-emphasize Procedures in Payment Strategies • Pay Higher Fees to Doctors Who Diagnose & Treat Chronic Illnesses • Discharge Management: • Need Greater Emphasis (Includes Funding) • Should Focus More on the Home Care Environment