New Look At the Elderly

By John S. DeMott

Elderly people in America live alone on fixed incomes in drab apartments. They struggle for the necessities of life, ignored by their children and sick most of the time. That is the stereotype of old folks in America. Last week, however, the annual report of the President's Council of Economic Advisers challenged such conventional wisdom. Said the report: "Thirty years ago the elderly were a relatively disadvantaged group in the population. That is no longer the case." Most elderly people today live in paid-for homes, with enough money to enjoy their leisure years.

The council pointed out that the graying of America is the most significant demographic change that will face the U.S. in the next 50 years. "Every American and every facet of the society will be affected." The share of the population that is elderly is growing fast. Thirty years from now, when the early waves of baby boomers retire, the U.S. as a whole will have the same ! proportion of old people as Florida does today: 17.5%.

The source of income for the elderly has changed dramatically over the past three decades. Salaries were the most important source of money, but now they account for only 15% of retirees' income. Even so, the ranks of oldsters working at least part time are growing. About half the men 65 and over now work part time, vs. only 35% in 1960. A deterrent to full-time work for many retirees is that Social Security is in effect taxed at the 50% rate for earnings above $7,320. Thus many people work just enough to keep under the cutoff.

The most important source of money for the majority of elderly people today is Social Security, which, says the report, accounts for about 40% of retirees' income. Just behind that is the 25% provided by their own assets, such as savings and investments. Another major chunk comes from private pensions. Only a quarter of the work force was covered by pensions in 1950, but now half of all workers have them. In the future more and more employees will fall under various plans.

The perception that retired people are especially susceptible to inflation "is not supported by recent evidence," says the council in the dry, scholarly tone of the report. In fact, the elderly have done relatively better in keeping up with rising prices in recent years than the population as a whole. Social Security payments, tied by a 1972 law to the rate of inflation, went up 46% in real terms since 1970, while wages and salaries of people still working withered by 7%. Prices increased 312% between 1950 and 1983. During that same period, wages and salaries rose 412%, but the typical monthly Social Security payment jumped 905%. Says the report: "Thus younger families have had to work more to keep up with inflation; older families have not."

Best off among Americans now retired are people whose spouses are still living. The average income in that group, after accounting for inflation, has nearly doubled since 1950. When all sources of income are taken into account, the retired are taking in more money, in real terms, than they did when they were working in their early years. Measured in 1983 dollars, the young working family had an average income of $14,910 in 1950. In 1980, after retirement, that rose to $20,370. When such benefits as food stamps, medical care and housing assistance are considered, only 3% of this group are counted as officially poor. Even if those grants are not counted, the poverty rate for , the elderly is 14.1%, vs. 15.4% for the rest of the U.S. A large percentage of old people live independently. Relatively few, only 5%, reside in nursing homes, and only 9% live with their children. In 1950, 31% of people over 65 were with their families.

Not all older Americans are so fortunate. Worse off are old people living alone, especially elderly blacks, the very old and elderly women. Their financial distress, though, is not so much a function of aging as it is of education, race and their past employment, factors the council found "lead to low income at all ages." Older women are particularly vulnerable. They tend to stay single after a divorce or death, lowering household income. Widowed or divorced men, in contrast, remarry at seven times the rate of women.

Not surprisingly, lobbyists for the elderly did not take kindly to the council's upbeat views. "Totally cockeyed" was the verdict of Charles Edwards, a spokesman for the National Council on the Aging. He claimed that the study painted a rosy and unrealistic picture of older America. Others saw it as part of an effort by the Reagan Administration to prepare the ground for an assault on Social Security as part of budget cutting. Republican leaders in Congress are already attempting to impose a one-year freeze on the cost of living adjustment. The President has pledged not to cut benefits.

William Hutton, executive director of the National Council of Senior Citizens, criticized the report for not mentioning the "millions of older people now hovering just above the poverty level." Said Cyril Brickfield, executive director of the 18 million-member American Association of Retired Persons: "If it was misleading in the 1960s to infer that all older persons were living in poverty, it is equally misleading today to imply they are generally affluent and living well."

Providing decent living standards for the elderly puts a great burden on younger people. Today's workers are paying for benefits to retirees that far exceed contributions the retirees made during their working years. An individual who goes on Social Security this year has put about $50,124 into the system during his lifetime. If he gets the average 1985 payment of $594 a month, it will take seven years to recoup that. The debate between the generations in America will certainly continue.

With reporting by Christopher Redman/ Washington