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Abstract
According to the federal government, elderly poverty rates among blacks are nearly triple and among Hispanics are more than double those of whites. Data from the 2004 Health and Retirement Study on adults age 65 and older, living alone or with only a spouse, show how assets, which are excluded from the official poverty measure, change elderly poverty overall and between racial/ethnic groups. Adding imputed housing rent and annuitized asset values to resources reduced overall poverty by 1.8 percentage points, but increased racial disparities because blacks and Hispanics have relatively little housing equity or financial assets.
Introduction
According to the federal government, fewer than 1 in 10 adults age 65 and older is living in poverty. However, elderly poverty rates among blacks are nearly triple and among Hispanics are more than double those of whites.
The official measure of poverty is based only on cash income and fails to account for other resources, such as assets. Housing equity, the most important asset for many Americans, reduces the need to make rental payments and effectively increases income. In addition, housing net worth provides a means of covering expenses. (For instance, reverse mortgages allow homeowners to borrow against the equity in their homes.)
Financial assets can also be used to cover expenses beyond the income they yield. Older adults could convert their wealth into an annuity that guarantees a lifetime income and helps them manage their spending. But regardless of whether retirees dip into their housing equity or convert their wealth into an annuity, their housing equity and financial wealth clearly provide security beyond traditional measures of income.
Data from the 2004 Health and Retirement Study (HRS) on adults age 65 and older, show how racial differences in poverty rates change when imputed rental income and annuitized asset values are added to income. These data suggest that 6.5 percent of older adults living alone or with only a spouse were poor (Butrica, Murphy, and Zedlewski 2008). Compared with white adults, black adults were 4.7 times more likely to be poor, and Hispanic adults were 5.8 times more likely to be poor (figure 1). Adding imputed rental values and the annuitized value of financial and pension assets to resources reduced overall poverty by 1.8 percentage points, but significantly increased racial disparities because blacks and Hispanics have relatively little housing equity or financial assets. Using this broader measure of resources, blacks were 6.4 times more likely than whites to be poor, and Hispanics were 8.1 times more likely than whites to be poor.
(This publication is also available in PDF format.)
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
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