Although many Americans are living longer, a new public policy analysis reveals that a disproportionate number of older people are also living in poverty – particularly if they are a person of color. According to the AARP Public Policy Institute, Social Security keeps about 30 percent of older African Americans and Hispanics from retirement poverty. Yet another 20 percent of these two ethnicities at ages 65 or older, live in poverty at a rate that is double that for whites.
The reasons for these disparities are tied to multiple economic impacts incurred over lifetimes spent in the workplace. Years of working at lower incomes and wages do not easily allow for aggressive savings or investment portfolios. Additionally, many people of color have or held jobs that did not provide for pensions or retirement accounts. For other workers whose employers provided some kind of retirement plan, often the benefits are smaller.
Among all people of color, AARP found that higher-income Asian-Americans were the most likely to receive diversified incomes in retirement years that included interest, dividends and rental income from assets.
For Black and Latino retirees, more than a quarter eventually rely on Social Security for 90 percent of their family income, says AARP. According to the report, “The median annual Social Security family income of older minorities is roughly 26 percent lower than that of older whites.”
The worst disparities in Social Security benefits were found in comparing women by race and marital status. Never-married African-American women usually receive benefits at much lower rates than married women of color. By contrast, older white women regardless of marital status received benefits at much similar rates to white men.
Fortunately, the Social Security Administration provides options to increase the amount of monthly benefits by determining the best time to retire.
For example, most consumers can receive Social Security benefits as early as age 62. The trade-off is that the monthly payments will be lower than those choosing to wait for full benefits. People born before 1938 are eligible for full benefits at 65. For people born in 1960 or later, 67 is the age to receive full retirement. If retirement can be delayed until age 70, those extra years of working will earn higher benefits than those available at an earlier age.
Regardless of when people choose to retire, Social Security recipients are eligible for cost-of-living adjustments (COLAs). After no COLAs were offered in 2010 or 2011, this year retirees will receive a 3.6 percent adjustment. Earlier this week, the Labor Department indicated an estimated 2013 increase will be in the range of 1.5-1.7 percent.
The Social Security Administration advises that a worker with average earnings can expect a retirement benefit equivalent to 40 percent of his/her lifetime earnings. Each worker’s average index includes the 35 years in which the most earnings occurred.
Anyone planning to retire is advised to contact Social Security three months before the date desired for benefits to begin. When applying for benefits, documents such as birth and/or marriage certificates and the most recent W-2 form must be submitted to determine eligibility.
According to AARP, “Social Security is and will continue to be the main source of income for low-and moderate-wage retirees; but improvements in other programs would alleviate poverty and income insecurity among older Americans.”
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at: email@example.com.