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entitled 'Income Security: The Effect of the 2007-2009 Recession on 
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United States Government Accountability Office: 


Before the Subcommittee on Primary Health and Aging, Committee on 
Health, Education, Labor and Pensions, U.S. Senate: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT: 
Tuesday, October 18, 2011: 

Income Security: The Effect of the 2007-2009 Recession on Older Adults: 

Statement of Barbara D. Bovbjerg, Managing Director, 
Education, Workforce, and Income Security Issues: 


Mr. Chairman, Ranking Member Paul, and Members of the Subcommittee: 

I am pleased to be here today to discuss the effects of the recent 
recession on older adults.[Footnote 1] While the recession officially 
ended in June 2009, our economy has experienced a weak recovery, with 
unemployment still above 9 percent. Older adults--particularly those 
close to or in retirement--may not have the same opportunities as 
younger adults to recover from the recession's effects. For example, 
older adults--generally those 55 and older--may have insufficient time 
to rebuild their depleted retirement savings due to sharp declines in 
financial markets and home equity, and increased medical costs. 
Further, while older workers are less likely to be unemployed than 
workers in younger age groups, when older workers lose a job they are 
less likely to find other employment.[Footnote 2] These changes have 
intensified older adults' concerns about having sufficient savings now 
and adequate income throughout retirement. 

Social Security forms the foundation of income for nearly all retiree 
households, providing 36 percent of aggregate income for households 
with a member aged 65 and older; however, it provides a much greater 
portion of income for low and middle income households. Pensions and 
assets together provide 31 percent of aggregate income. However, many 
older adults lack any pension; 44 percent of full-time workers in their 
50s have neither a defined benefit nor a defined contribution pension 
from their current employer; and the number of active defined benefit 
plan participants has declined since 1990. In 2007, before the 
recession began, the median level of financial assets for households 
approaching or entering retirement was around $72,000. Using a 4 
percent withdrawal rate in retirement, this amount would replace about 
five percent of these families' $55,000 median annual household income. 
Although most retirees would also receive Social Security benefits, for 
many retirees even these will not be sufficient to maintain their 
standard of living. Older Americans' income varies widely. In 2008, 
annual income for households with a member age 65 and older ranged from 
$7,466 for those in the lowest of five income groups to $109,543 for 
the highest of five income groups (see fig. 1). 

Figure 1: Average Income by Source for Households in the Lowest, 
Middle, and Highest of Five Income groups, 2008: 

[Refer to PDF for image: horizontal bar graph] 

Average income source for households in the lowest, middle, and 
highest of five income groups, 2008: 

2008 Income quintile: Lowest (1st); 
Social Security: $6,212; 
Pensions and annuities: $246; 
Asset income: $157; 
Earnings: $134; 
Other: $717; 
Total: $7,466. 

2008 Income quintile: Middle (3rd); 
Social Security: $16,145; 
Pensions and annuities: $4,111; 
Asset income: $1,630; 
Earnings: $2,457; 
Other: $702
Total: $25,069. 

2008 Income quintile: Highest (5th); 
Social Security: $19,608; 
Pensions and annuities: $20,485; 
Asset income: $19,499; 
Earnings: $47,870; 
Other: $2,081
Total: $109,543. 

Source: GAO and SSA analysis of 2008 income data from the March 2009 
U.S. Census Bureau, Current Population Survey, Annual Social and 
Economic Supplement. 

Note: Households are defined here as either a married couple living 
together where one member is 65 or older, or a single person age 65 or 
older. Income from other people (such as adult children living at 
home) is not included in household income. "Other" includes noncash 
benefits, veteran’s benefits, unemployment compensation, workers’ 
compensation, and personal contributions. 

[End of figure] 

Those in the lowest and middle groups received most of their income 
from Social Security retirement benefits, while those in the highest 
group on average received most of their income from earnings, asset 
income, and pensions. 

Today's testimony is based on a GAO report that we are releasing at 
this hearing, titled Income Security: Older Adults and the 2007-2009 
Recession.[Footnote 3] This report examined: (1) What changes have 
occurred in the employment status of older adults, generally those 55 
and older, with the recession? (2) How have the incomes and wealth of 
older adults in or near retirement changed with the recession? (3) What 
changes have occurred in the costs of medical care, the purchasing 
power of Social Security benefits, and mortality rates for older adults 
in recent years? To address our objectives, we used Bureau of Labor 
Statistics (BLS) and Census Bureau data concerning the employment 
status of older adults,[Footnote 4] Census Bureau and Federal Reserve 
Board data concerning the income and assets of older adults, BLS data 
concerning the costs of medical care, Social Security Administration 
and BLS data concerning the purchasing power of Social Security 
benefits, United States Department of Agriculture data concerning food 
security, and Centers for Disease Control and Prevention data 
concerning mortality rates for older adults[Footnote 5]. We determined 
that the data were sufficiently reliable for the purposes of the 
report. We also reviewed relevant federal laws and regulations. We 
conducted our review between July and September 2011 in accordance with 
generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings 
based on our audit objectives. We believe that the evidence obtained 
provides a reasonable basis for our findings and conclusions based on 
our audit objectives. 

Mr. Chairman, the following summarizes our findings on each of the 
three issues discussed in our report: 

Since 2007, unemployment rates doubled and remained higher than before 
the recession for workers aged 55 and older. While these rates were not 
as high as for other age groups, of more concern is that once older 
workers lose their jobs they are less likely to find other employment. 
In fact, the median duration of unemployment for older workers rose 
sharply from 2007 to 2010, more than tripling for workers 65 and older 
and increasing to 31 weeks from 11 weeks for workers aged 55 to 64 (see 
fig. 2). 

Figure 2: Duration of Unemployment by Age Group, 2007 and 2010: 

[Refer to PDF for image: vertical bar graph] 

Duration of unemployment by age group, 2007 and 2010: 

Median weeks of unemployment: 

Ages: 25 to 34 years; 
2007: 9 weeks; 
2010: 21 weeks. 

Ages: 35 to 44 years; 
2007: 9 weeks; 
2010: 24 weeks. 

Ages: 45 to 54 years; 
2007: 11 weeks; 
2010: 29 weeks. 

Ages: 55 to 64 years; 
2007: 11 weeks; 
2010: 31 weeks. 

Ages: 65 years and over; 
2007: 8 weeks; 
2010: 29 weeks. 

Source: Bureau of Labor Statistics. 

Note: Estimates have confidence intervals that are within +/-23 percent 
of the estimate itself. All statements made in the text were found to 
be statistically significant. 

[End of figure] 

In addition, the proportion of older part-time workers who indicated 
they would prefer full-time work nearly doubled during this time. 

Household income fell by 6 percent for adults 55-64, but increased by 5 
percent for adults 65 and older. Median household net worth fell during 
the recession for older adults. Poverty rates increased for adults aged 
55-64, but declined for those 65 and older, while low incomes were more 
prevalent in older age groups than in younger ones (see fig. 3). 

Figure 3: Percentage of Adults with Incomes Below 200 Percent of the 
Poverty Level by Age Group, 2007-2010: 

[Refer to PDF for image: vertical bar graph] 

Percentage of adults with incomes below 200 percent of the poverty 
level by age group, 2007-2010: 

Age: 55-59; 
2007: 20%; 
2008: 21%; 
2009: 22%; 
2010: 22%. 

Age: 60-64; 
2007: 23%; 
2008: 24%; 
2009: 24%; 
2010: 25%. 

Age: 65-69; 
2007: 27%; 
2008: 27%; 
2009: 27%; 
2010: 26%. 

Age: 70-74; 
2007: 34%; 
2008: 34%; 
2009: 32%; 
2010: 32%. 

Age: 75 and older; 
2007: 43%; 
2008: 43%; 
2009: 39%; 
2010: 42%. 

Source: U.S. Census Bureau, Current Population Survey, Annual Social 
and Economic Supplements. 

Note: Estimates have 95 percent confidence intervals that are within +/
-3 percent of the estimate itself. All statements made in the text were 
found to be statistically significant. "Poverty level" refers to levels 
determined by the Census Bureau. 

[End of figure] 

Furthermore, the recession leaves older adults with difficult choices 
regarding retirement savings. Neither stocks nor real estate have 
recovered from their low points during the recession, and continued low 
interest rates mean that savings provide little, if any, interest 
income after inflation.[Footnote 6] According to a survey by the AARP 
Policy Institute, many older Americans experienced financial hardship 
during the recession.[Footnote 7] For example, nearly a quarter of 
survey respondents aged 50 and older indicated that they or someone in 
their family had exhausted or used up all of their savings during 2007-
2010, while more than 12 percent stated that they or someone in their 
family had lost their health insurance.[Footnote 8] Among those who 
reported having difficulty making ends meet during 2007-2010, nearly 50 
percent reported that they delayed getting medical or dental care, or 
delayed or ceased taking medication. In addition, more than one-third 
reported that they had stopped or cut back on saving for retirement. 

Medical costs continued to rise faster than other costs, and older 
adults continued to spend more on medical care than those in younger 
age groups. The purchasing power of Social Security benefits was 
maintained with cost-of-living adjustments and, for those receiving 
benefits in 2009, increased with a one-time $250 Recovery Act payment 
in 2009.[Footnote 9] Mortality rates for older adults continued a long-
term decline during 2007-2009. 

In conclusion, the recession of 2007 to 2009 has had a profound impact 
on older adults, many of whom, like other groups, have lost employment 
and wealth. The major challenges for older adults are that they face a 
shorter timeframe before retirement to make up for these losses. Social 
Security likely helped keep some eligible long-term unemployed older 
adults from falling into poverty, but workers who had to leave the 
workforce prematurely could still face insufficient income at older 
ages. In addition, more of today's older retirees are able to rely on 
lifetime retirement income from defined benefit plans than will in the 
future. The shift from defined benefit to defined contribution pension 
plans will make future retirees more dependent on their own choices 
about how much to save, how to invest those savings, at what age to 
retire, and how to draw upon those savings; and make them more 
vulnerable to financial market volatility. 

Chairman Sanders, this concludes my statement. I would be happy to 
answer any questions that you or other members of the Subcommittee 
might have. 

For further information regarding this testimony, please contact 
Barbara Bovbjerg at (202) 512-7215 or Contact points 
for our Office of Congressional Relations and Public Affairs may be 
found on the last page of this statement. Individuals who made key 
contributions to this testimony include Charles A. Jeszeck, Director; 
Michael J. Collins, Assistant Director; Eve M. Weisberg; Rachel E. 
Frisk; Kathy D. Leslie; Mimi Nguyen; Thomas A. Moscovitch; Kathryn I. 
O'Dea; Rhiannon Patterson; Benjamin P. Pfeiffer; Kathleen K. Scholl; 
Kenneth C. Stockbridge; Roger J. Thomas; Frank Todisco; Walter K. 
Vance; and Kathleen L. van Gelder. 

[End of section] 


[1] The National Bureau of Economic Research Business Cycle Dating 
Committee identifies the period of this recession to be December 2007 
through June 2009. 

[2] GAO, Social Security Reform: Raising the Retirement Ages Would Have 
Implications for Older Workers and SSA Disability Roles, [hyperlink,] (Washington, D.C.: Nov. 18, 

[3] GAO, Income Security: Older Adults and the 2007-2009 Recession, 
[hyperlink,] (Washington, D.C.: 
Oct. 17, 2011). 

[4] Data on the labor market outcomes of displaced workers and the 
number of older workers who are low wage are based on GAO analyses of 
microdata from the Current Population Survey. For our analysis of the 
re-employment experiences of older displaced workers, we used data from 
the 2008 and 2010 Displaced Worker Supplements to the CPS; the analysis 
was not restricted to workers who had held the job from which they were 
displaced for a minimum period of time. For our analysis of low-wage 
older workers, we used data from the outgoing rotation groups of the 
CPS (the basic monthly CPS) for the years 2007 and 2010. We defined 
"low-wage" as those with an hourly wage rate in the bottom quintile 
(bottom 20 percent) of wages across the workforce for workers who 
reported positive earnings. We estimated the hourly wage rate using 
usual weekly earnings divided by usual hours worked per week. 

[5] Since data on life expectancy are based on projections using older 
data, prior to the recession, we examined mortality rates, which 
directly affect life expectancy and have more updated data available. 

[6] In 2009, however, real interest rates were positive as consumer 
prices fell. 

[7] See AARP Public Policy Institute, Recovering from the Great 
Recession: Long Struggle Ahead for Older Americans (Washington, D.C.: 
2011). AARP surveyed adults aged 50 and over who had been in the labor 
force at some point during the previous 3 years. Their findings were 
based on a random sample of U.S. residents aged 50 and older from a 
panel representative of the U.S. population. 

[8] This question was asked of those aged 50 or older (n=5,027): Which 
if any of the following financial hardships have you/your family 
experienced in the past 3 years? 

[9] Cost of living adjustments are currently based on the consumer 
price index for urban wage earners and clerical workers, reflecting 
prices for these workers. There is concern that this measure may be 
based on consumer items that may not be representative of those 
purchased by older adults. No reliable measure is currently available 
of inflation targeted exclusively on older adults' consumption. 

[End of section] 

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