Seniors Are Not on Easy Street, Expert Says

Census report gives an incorrect impression. Here's why

by: Cathie Gandel, from: AARP Bulletin, October 13, 2010

When the Census Bureau released its figures on poverty in September, the dismay over a general upsurge — the number of people in poverty reached a record level of 43.6 million in 2009 — was matched only by surprise at the news that the rate for people 65 and older actually decreased.

According to the report, the poverty rate increased for people 18 to 64 from 11.7 percent in 2008 to 12.9 percent in 2009. But right in the middle of a deeply distressed economy, it declined for people 65 and over from 9.7 percent in 2008 to 8.9 percent in 2009.

"The report does give the impression that seniors are on easy street while the rest of the population is suffering dramatically," says Alicia H. Munnell, director of the Center for Retirement Research at Boston College.

But she says that conclusion that older people "are doing just fine" is wrong.

The lower poverty figure, she says, is "an anomaly that is likely to reverse itself." Why? She cites two main reasons.

The lower poverty rate was caused in large part by a sky-high Social Security cost-of-living adjustment (COLA) for 2009. It was calculated in October 2008, when the consumer price index — which is based on prices of a market basket of goods and services — was rising rapidly because of a ballooning of energy prices. Those were the times of $4 a gallon gasoline.

This run-up quickly reversed itself but not before resulting in a 5.8 percent COLA for 2009. People on Social Security received an increase to compensate for higher prices that no longer existed.

For 2010, with inflation remaining very low, Social Security beneficiaries received no cost-of-living rise at all. The government is expected to announce this week that there will be no COLA in 2011 either.

The decline in senior poverty was also caused in part by one-time $250 payments to individuals who receive retirement and disability benefits. This windfall was part of the $787 billion national economic stimulus package, the American Recovery and Reinvestment Act of 2009. Congress has not authorized any additional payments.

Cathie Gandel writes on business and the economy. She lives in New York.