COVID-19 Pandemic Presents Income Challenges for Older Americans
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by Covid-19 Health Resource Center | 8.5.20
What’s the story?
- The income sources relied upon by older Americans, particularly those who are considering or are already in retirement, are different than their younger counterparts. As a result, the older Americans may feel the economic impact of the coronavirus (COVID-19) pandemic differently.
How many older Americans are there & where does their income come from?
- According to data from the Census Bureau, as of 2018 there were 72.7 million Americans over the age of 60 and representing 22% of the U.S. population. For the last decade, 10,000 Americans have turned 65 which is a common retirement age.
- In 2019, the Social Security Administration (SSA) gave Old-Age, Survivors, and Disability Insurance (OASDI) to 64 million people, of whom 48 million were retirees and their dependents.
- Traditional income from work represents about 29% of older Americans’ income, whereas it’s roughly 67% of the overall population’s income, so older American rely more on retirement benefits, investment income (16% of older Americans’ income), and government transfers from programs like Social Security & Medicare (37% of older Americans’ income). Income from retirement plans & investments has become harder to predict amid the market volatility that has occurred during the COVID-19 pandemic.
- Older Americans’ sources of income are very different than those of younger Americans who are still in the workforce, as their wage income is augmented by retirement benefits, investments, Social Security income, & Medicare which helps offset medical costs. This USAFacts chart breaks down the average income of Americans age 65 and older:
- Wage income continues to comprise a significant amount of older Americans’ income, as one-in-five over age 65 are employed or seeking employment so they’re included in the labor force participation rate. This USAFacts chart shows how the labor force participation rate among Americans age 65 or older has changed over time:
- Most older Americans work in management (8.2%) or sales & office occupational (7.3%) roles. The industry with the highest concentration of older Americans in the workforce is agriculture (17.3%), while repair & maintenance work, labor unions, and arts, entertainment, & recreation are also popular industries.
- During the economic lockdowns imposed by states & localities to slow the spread of the coronavirus pandemic, the unemployment rate of age 65+ Americans jumped from 3.7% in March to 15.6% in April compared to a jump from 4.4% to 14.7% for the entire population over age 16.
- Because of the size of the baby boomer generation and the upward trend in the labor force participation by Americans age 65 and up, their share as a proportion of the overall workforce has increased as this USAFacts shows:
- Labor Dept. data indicates that 137 million Americans participated in pension plans in 2017, three-fourths of whom participated in defined contribution plans like 401(k)s which workers contribute a set amount of money into & receive an amount based on its performance; while one-fourths of whom participated in defined benefit plans which provided workers a promised, specific amount of money monthly. This USAFacts chart shows the divergence of the defined contribution & defined benefit retirement plans:
- Part of the reason for the decline in defined benefit pension plans have declined is that some pension plans have become insolvent because they failed to achieve the necessary returns to fulfill the promised benefits. The volatility of the COVID-19 pandemic has only worsened the outlook for some of those defined benefit pension plans.
— Eric Revell
(Photo Credit: iStock.com / Eva-Katalin)
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