Census Data Showing Drop in Poverty for Older Americans is Misleading says CRR

The Center for Retirement Research reports that though there has been an increase in the percentage of those living below the poverty threshold in the United States, the 65 and older age group has actually experienced a decrease.

According to the US Census Bureau, job loss and long-term unemployment has attributed to the percentage of Americans living in poverty to increase from 13.2 percent in 2008 to 14.3 percent in 2009.  This means an additional 3.7 million Americans are living in poverty. And though every age group experienced an increase in poverty with the exception of the 65 and over group (which experienced a decrease), it seems these numbers may be misleading.

While the figures do show a decrease of 0.8 percent for the 65 and over group, this is largely due to two key factors: a substantially big cost-of-living adjustment (COLA) for Social Security beneficiaries in 2009, and a depreciation of the index used to adjust the poverty threshold for 2009.

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This method of measuring the poverty threshold in the United States has been used since the 1960s by factoring dollar thresholds based on family size and composition. If a family’s total income is less than the estimated threshold, every member of that family is considered to be living in poverty. These computations are updated annually to reflect the change of prices based on the Consumer Price Index for All-Urban Consumers (CPI-U). The 2008 CPI-U was lower than the average annual CPI-U for 2009, thus creating a lower poverty threshold.

In 2009, the poverty threshold for the 65 and over age group was $10, 289 for a single person and $12,968 for a couple. For low-income households in this age group, Social Security contributes to 84 percent of the total family income. Every October, the maintenance of purchasing power after retirement for Social Security beneficiaries is evaluated and necessary adjustments are made the following January.

In 2008, a rise in energy prices resulted in a 5.8 percent COLA for 2009. Additionally, the American Recovery and Reinvestment Act of 2009, better known as the stimulus package, allotted a one-time payment of $250 to recipients of Social Security retirement and disability benefits. This means a couple would have received a total of $500, which means a 4 percent income increase for a household near the poverty threshold. So ultimately, the decrease in poverty levels for the 65 and over age group was simply the result of a big COLA and a government payment of $250.

For the future, the Office of Management and Budget expects the number of those living near the poverty threshold to increase in 2010 by 1.6 percent and in 2011 by an additional 1.3 percent. With no more payouts from the government and no COLA for the next two years, the 65 and over group will likely experience poverty increases like the rest.

Written by Kelly Mellott

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