The Myth of the Wealthy Elderly

[WildNovember]

Dean Baker
Truthout, November 14, 2011

The austerity gang seeking cuts to Social Security and Medicare has been vigorously promoting the myth that the elderly are an especially affluent and privileged group. Their argument is that because of their relative affluence, cuts to the programs upon which they depend is a simple matter of fairness. There were two reports released last week that call this view into question.

The first was a report from the Census Bureau that used a new experimental poverty index. This index differed from the official measure in several ways; most importantly it includes the value of government non-cash benefits, like food stamps. It also adjusts for differences in costs by area and takes account of differences in health spending by age.

While this new measures showed a slightly higher overall poverty rate the most striking difference between the new measure and the official measure was the rise in the poverty rate among the elderly. Using the official measure, the poverty rate for the elderly is somewhat lower than for the adult population as a whole, 9 percent for the elderly compared with 14 percent for the non-elderly adult population. However with the new measure, the poverty rate for the elderly jumps to 14 percent, compared with 13 percent for non-elderly adults.

The report showed that the median wealth for a household over age 65 is $170,500. This measure includes everything that they own, including equity in their home. With the median house selling for roughly $170,000, this study implies that the typical household over age 65 would essentially have enough money to pay off their mortgage. They would then have nothing else to live on except their Social Security.

The situation looks even worse for the near elderly: the cohorts between the ages of 55 to 64. (Wealth typically peaks in these years, so these people are unlikely to have more wealth when they cross age 65.) The median wealth for this group was reported as $162,000. Using the Pew findings, the typical household in the 55 to 64 year old cohort would fall 5 percent short of the money needed to pay off the mortgage on the median home.

Alternatively, if they were to use this wealth to buy an annuity at age 65, it would be sufficient to get them an annuity of roughly $10,000 a year or just over $800 a month. This would supplement Social Security income that comes to less than $1,200 a month for a typical worker. The monthly premium for Medicare Part B is $100, which would leave $1,100 from a monthly Social Security check for a typical retiree.

This is the group that the Very Serious People in Washington want to target for their deficit reduction. While the Very Serious People debate whether people who earn $250,000 a year are actually rich when it comes to restoring the tax rates of the 1990s, they somehow think that seniors with incomes under $30,000 a year must sacrifice to balance the budget. There is a logic here, but it ain’t pretty.

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-myth-of-the-wealthy-elderly

[dkf]

1. Maybe the point is no one is wealthy. It sure isn't the population under 55 either.

[LiberalFighter]

2. I was going thru court records regarding probate

and it appeared that about 30 - 50% owed to creditors. I found only one that had over $200k in assets.

[zazen]

3. what's "poverty" rate with Medicare vs non-Medicare?

I mean, I might have slightly more income than a 65-year-old (I don't), but copays at a hospital would bankrupt me. They don't bankrupt them. So with all else being even, if they have a huge portion of life costs paid for and I don't, how is it I'm better off? And I'm 45 with lots of health problems, so don't tell me I've got "years" of earning potential ahead of me.

I agree--let's not target the elderly, because their situation is bad enough--but the point is, it's that much worse for our generation.

[WildNovember]

5. The report adjusts for non-cash benefits.

[county worker]

4. Cutting social security and medicare are both part of the right's attempt to gut the government.

The deficit was created by spending on two wars, the Medicare drug benefit, the deregulation of Wall Street and the Bush tax cuts. These were all part of the plan to gut government so that cutting social programs would be more palatable to Americans who are fooled into thinking cutting spending will decrease the deficit.

If the right gets control of the government as they did during the Bush administration they would continue their assault on the treasury handing the money to the 1% increasing the deficit while cutting social programs.

The deficit is a short term problem and can be solved by reversing what got us here. Cut the defense budget, let the government compete for lower drug prices, end the Bush tax cuts and re regulate Wall Street and add a transactions tax.

The fact that we even include cuts to social security and medicare in this conversation shows that we have swallowed the right wing talking points hook line and sinker. Gutting social programs is a long term action while cutting the deficit is a short term action. The social program cuts will not be reversed if and when the deficit is reduced. The deficit and cutting social programs are both on the same side of the right wing coin. They are both part of the conservative play book.

[libinnyandia]

6. What is so sad is that so many of them vote for Republicans.

They believe the Republican lies. Death panels, death panels!