Reducing Poverty for Our Oldest Retirees
With more Americans today living into their 80s and beyond, the elderly are becoming more vulnerable to slipping into poverty.
To reduce the poverty risk facing the oldest retirees, some policy experts have proposed increasing Social Security benefits for everyone at age 85. Under one common proposal analyzed by the Center for Retirement Research in a new report, the current benefit at this age would increase by
The poverty rate for people over 85 is 12 percent, compared with 8 percent for new retirees. But more elderly people may actually be living on the edge, because the income levels that define poverty for them are so low: less than $11,757 for a single person and less than $14,817 for couples.
One reason the oldest retirees are especially vulnerable is that their medical expenses are rising as their health is deteriorating, yet they’re too old to defray the expense by working. This is occurring at the same time that the value of their employer pensions – if they have one – has been severely eroded by inflation after many years of retirement.
Further, elderly women are more likely to be poor than men, because wives usually outlive their husbands, which triggers a big drop in income that is generally not fully offset by a drop in their expenses.
Limiting the 5 percent benefit increase to the oldest retirees would ease poverty while containing the cost. One way to pay for this would be to slightly reduce Social Security’s annual cost-of-living adjustment, or COLA. Cutting the COLA from, say, 2.00 percent to 1.94 percent would redirect resources away from the years when a retiree is younger and generally better off to the later years when her risk of becoming poor increases.
A variation of this proposal would increase benefits for all 85-year-olds by the same dollar amount – rather than a percentage. Both options would cost about the same, but the dollar increase would have the advantage of giving a larger boost in benefits to the lowest-income elderly people.
The researchers conclude that a flat-dollar increase “is the best way to target those most at risk” – and this could be done at relatively little cost to the Social Security program.
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