December 1997

Income of the Elderly, 1996

The average income of elderly individuals (ages 65 and older) in 1996 was $17,708, up from $12,239 in 1974. These figures are based on Employee Benefit Research Institute (EBRI) tabulations of data from the March 1997 Current Population Survey (CPS).

The percentage of the elderly's income derived from Social Security declined from 42.0 percent in 1974 to 38.6 percent in 1989, then increased to 44.4 percent in 1994. In 1996, the percentage of the elderly's income derived from Social Security declined to 42.9 percent. In 1996, the average amount an elderly person received in income from Social Security was $7,504.

Income from pensions and annuities accounted for a steadily increasing share of the elderly's income from 1974 to 1994. In 1974, these sources accounted for 14.0 percent of their income; by 1994, that percentage had increased to 20.0 percent. In 1996, pensions and annuities accounted for 19.7 percent of the elderly's income. In 1996, the average amount an elderly individual received in income from pensions and annuities was $3,485.

In 1996, the average private pension plan income received by an elderly person was $1,775. The average public employer pension plan income received by an elderly person was $1,557.

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. The percentage of the elderly's income coming from assets then declined to 25.2 percent in 1989 and to 18.1 percent in 1996. In 1996, the average amount an elderly person received in income from assets was $3,130.

Income from earnings declined as a percentage of the elderly's income from 21.3 percent in 1974 to 14.9 percent in 1994. In 1996, income from earnings increased to 17.4 percent of the elderly's income. In 1996, the average amount an elderly person received in income from earnings was $3,077.

The lower the individual's total income, the greater the percentage of that income that comes from Social Security. In 1996, Social Security accounted for 88.4 percent of the total income of elderly individuals in the lowest income quintile, compared with 21.4 percent for those in the highest income quintile.

The income quintiles are derived by taking all of the individuals ages 65 and older and assigning them, in equal number, among five groups based on income. The income ranges of the quintiles vary from year to year. In 1996, the lowest income quintile consisted of individuals with an income of $6,103 or less. The highest income quintile consisted of individuals with an income of $23,031 or higher.

There was a significant gender gap in the average income of elderly men ($23,768) versus elderly women ($13,309) in 1996. This is in part attributable to the fact that, among members of the generation that currently makes up the elderly, men had a greater lifetime attachment to the work force than women. Given the increasing role of women in the work force, the income gap between the sexes will narrow.

Elderly women derived a greater share of their income from Social Security and assets than men did in 1996. Social Security accounted for 50.2 percent of elderly women's income, compared with 37.3 percent of elderly men's income. Income from assets accounted for 22.2 percent of elderly women's income, compared with 14.9 percent of elderly men's.

Elderly men derived a larger share of their income from employment-based sources, including pensions and annuities and earnings, than elderly women did in 1996. Pensions and annuities accounted for 23.8 percent of elderly men's income, compared with 14.3 percent of elderly women's. Income from earnings accounted for 21.8 percent of the elderly men's income, compared with 11.7 percent of elderly women's.

The data in this fact sheet are from the March supplement to the CPS. Some research has shown that the March CPS underestimates the percentage of the elderly's income that comes from employment-based pension plans. This research uses data from the Bureau of Economic Analysis' National Income and Product Accounts and the Internal Revenue Service.1

For more information, contact Ken McDonnell (202) 775-6342 or mcdonnell@ebri.org.

Source: EBRI Databook on Employee Benefits, fourth edition, 1997.
1For a more detailed discussion of this point, see Sylvester J. Schieber, Why Do Pension Benefits Seem So Small?, Watson Wyatt Worldwide (Washington, DC, 1995).
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