50-Plus Population Not Prepared for Retirement, AARP Report Says

Americans older than 50 are better off financially than they were 20 years ago, but many are ill-prepared for old age, with only a third having private pensions and Social Security accounting for more than half of their retirement income after age 65, according to a report released last week.

The report by the AARP, a lobbying group for people 50 and older, also found growing inequalities between the rich and the poor in old age, with many low-income people relying solely on Social Security benefits. “The report shows an improving situation for those over 50, but there is a major gap between those who have assets and those who don’t,” AARP director John Rother said. The AARP was formerly known as the American Assn. of Retired Persons.

The biggest single area of concern, Rother said, was among the bottom 25% of workers in the 50-to-61 age range who had low wages, no pension coverage, no health insurance and were less likely to own homes.

The report, “Beyond Fifty, a report to the Nation on Economic Security,” looks at the overall well-being and economic security of America’s 50-plus population, which is increasing as a percentage of the total population.

In 2000, about 76 million Americans--or 28%--were older than 50. By 2020, there will be 40 million more in that group, amounting to 36% of the population.

Net worth increased 36% among 50-plus Americans from 1983 to 1998, fueled by a boom in the stock market. But these gains were not shared across the board.

Income grew 17% from 1980 to 2000 among people 50 and older, but it grew substantially faster in the top income group with a 28% rise versus the lower income group at 11% to 20%, the report said.

“The haves are those who have enjoyed cumulative advantages of higher-wage jobs with employer-based pensions and health insurance coverage, allowing them to save more on their own for retirement,” the AARP said.

Of low-income people age 50 to 61, the AARP said, 60% were women and 30% were black or Latino. Nearly one-fifth of this group’s income came from Social Security and one-quarter from other programs.

Their net worth was less than $6,500 in 2000 and their homeownership rate declined by five percentage points. Fourteen percent of the pre-retirees had no health insurance, and the rate was more than twice as high among the lowest-income group.

Social Security was never meant to be the main source of retirement income, the AARP said. However, it provided 90% or more of the total income for 27% of the population older than 65 in 1998, up from 23% in 1980.

Social Security kept 40% of people older than 65 out of poverty and made up more than half of most Americans’ retirement income, the report added. Social Security was the sole source of retirement income for 17% of those older than 65.

Marcia Greenberger, founder of the National Women’s Law Center, said Social Security was important particularly for women and that without it more than half of all elderly women would be living in poverty.

“To replace Social Security would be a financial disaster for women,” said Greenberger, adding that nearly two-thirds of women older than 65 received half their income from these benefits.

The AARP said employer-provided pensions need to be made more widely available and pension levels increased. In addition, the government could help low-income people by offering greater tax incentives for those saving for their retirement.

More people are working past the age of 62, the earliest age of eligibility for Social Security retirement benefits, and the AARP said the nation needs more safeguards against age discrimination in the labor force.

The AARP said a fourth pillar--health insurance--needs to be added to the traditional three-legged stool of retirement income--Social Security, savings and pensions. The rapid rise in health-care costs posed a big problem to America’s elderly, with out-of-pocket health costs amounting to an average 19% of income for those older than 65.