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Why Did Poverty Drop for the Elderly?

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Publication Date: September 2010

Publisher(s): Center for Retirement Research at Boston College

Author(s): Alicia H. Munnell; April Wu; Joshua Hurwitz


Special Collection:

Topic: Economics (Economic conditions)

Keywords: savings and consumption

Type: Report

Coverage: United States


The Census Bureau just reported a large increase in poverty in the United States. Driven by job loss and long-term unemployment, the poverty rate rose from 13.2 percent to 14.3 percent, as 3.7 million more Americans found themselves with incomes below the poverty threshold.1 Individuals aged 55-64 followed the national trend as they shared in job losses. Those 65 and over, however, saw a decline in their poverty rate. This outcome was the result of the timing of two different adjustments to reflect changes in consumer prices – an extraordinarily large cost-of-living adjustment (COLA) awarded to Social Security beneficiaries in 2009 and a decline in the index used to adjust the poverty threshold for 2009. This pattern is likely to be reversed in the future as Social Security beneficiaries receive no COLAs in 2010 and 2011 and the poverty threshold increases.

The discussion proceeds as follows. The first section describes the poverty thresholds and how they are adjusted over time. The second section discusses the importance of Social Security for low-income elderly and how Social Security benefits are adjusted for inflation. The third section speculates about how the indexing procedures are likely to affect the poverty rate of older Americans in 2010 and 2011.