Facts from EBRI

January 1996

Income of the Elderly

The average income for an individual aged 65 or over in 1994 was $16,049, up from $12,239 in 1974, based on Employee Benefit Research Institute (EBRI) tabulations of data from the March supplement to the 1995 Current Population Survey (CPS).

The percentage of the elderly's income coming from Social Security declined from 42.0 percent in 1974 to 38.6 percent in 1989, and subsequently increased to 41.7 percent in 1992 and to 44.4 percent in 1994.

Income from pensions and annuities has accounted for a steadily increasing share of the elderly's income. In 1974, pensions and annuities accounted for 14.0 percent of the elderly's income; by 1994, that percentage had increased to 20.0 percent.

Income from assets increased between 1974, when it accounted for 18.2 percent of the elderly's income, and 1984, when it accounted for 28.2 percent. This percentage then declined to 25.2 percent in 1989 and to 17.6 percent in 1994.

Income from earnings has shown a decline as a percentage of the elderly's income from 1974, when earnings accounted for 21.3 percent of the elderly's income, to 1994, when they accounted for 14.9 percent.

The lower an individual's total income, the higher the percentage of it that comes from Social Security. In 1994, Social Security accounted for 84.8 percent of the total income of elderly individuals in the lowest income quintile, compared with 23.2 percent for those in the highest income quintile.

There was a significant difference between elderly men's average income ($21,695) and elderly women's ($12,029) in 1994. This is in part attributed to men's greater lifetime attachment to the work force.

Elderly women receive a greater share of their income from Social Security and assets than elderly men. In 1994, Social Security accounted for 50.9 percent of elderly women's income, compared with 38.3 percent of elderly men's. Income from assets accounted for 21.3 percent of elderly women's income, compared with 14.1 percent of elderly men's.

Elderly men derive a larger share of their income from employment-based sources, including pensions and annuities and earnings, than women. In 1994, pensions and annuities accounted for 24.4 percent of elderly men's income, compared with 14.3 percent of elderly women's. Income from earnings accounted for 19.1 percent of elderly men's income, compared with 9.3 percent of elderly women's.

Research based on data from the Bureau of Economic Analysis' National Income and Product Accounts and the Internal Revenue Service indicate that the March CPS underestimates the percentage of the elderly's income that comes from employment-based pension plans.*

For more information, contact Ken McDonnell, (202) 775-6342 or Carolyn Pemberton, (202) 775-6341.

Source: EBRI Databook on Employee Benefits, Third edition, 1995; and "Baby Boomers in Retirement: What Are Their Prospects?" EBRI Issue Brief no. 151/Special Report SR-23 (July 1994).

*For a more detailed discussion of this point, see Sylvester J. Schieber, "Why Do Pension Benefits Seem So Small?" (Washington, DC: Watson Wyatt Worldwide, August 1995).