Options for Reducing Poverty Among Elderly Women
by Improving Supplemental Security Income
Kilolo Kijakazi
Wendell Primus

Center on Budget and Policy Priorities

National Academy of Social Insurance 12th Annual Conference
January 27, 2000

Social Security has been highly effective in reducing poverty among the elderly. The program is responsible for removing more people from poverty than all other government programs combined. Yet, there are groups of elderly who remain at risk of poverty including unmarried women. In 1999, President Clinton proposed a framework for addressing Social Security reform and an integral part of that framework was the recognition of the need to reduce poverty among beneficiaries who remain poor. The fiscal year 2000 budget that the Administration submitted to Congress stated: "The President will work to see that Social Security protections for elderly women and other especially vulnerable beneficiaries are improved."


Poverty Among Elderly Women

Why is it important to focus on elderly women as opposed to elderly men? Women are more likely than men to be in poverty as they grow older. Without Social Security, nearly 51.4 percent of women 65 and older would have been poor in 1998 compared to 39.7 percent of elderly men.(1) As a result of receiving Social Security benefits, the proportion of the elderly living in poverty was reduced to 14.0 percent for women and 8.4 percent for men. Social Security greatly reduced poverty for both genders, but the percentage of women remaining in poverty was nearly two times higher than the percentage of elderly men.

Unmarried Women

Among elderly women, unmarried women are particularly at risk of being impoverished. Before Social Security, 61.8 percent of elderly widows were impoverished in 1994-1998 compared to 42.8 percent of married women (Table 1). The highest poverty rate (66.7) was experienced by separated women, though this group made up less than two percent (1.6 percent) of all unmarried elderly women .(2), (3) Social Security lowered poverty to only six percent for elderly married women, but 20.2 percent of widows and 46.5 percent of separated women remained poor.

Table 1

Elderly Women in Poverty by Marital Status (Percent)





Never Married

Before Social Security






After Social Security






Source: These data are the result of analyses by the Center on Budget and Policy Priorities using Current Population Survey data collected by the Bureau of the Census.

The economic well-being of widows has received considerable attention in reform initiatives, but other unmarried women, who are more likely to experience poverty, have received less notice. Nearly one quarter of elderly divorced women were impoverished and 27.6 percent of elderly women who have never married were poor. As noted, elderly women who are separated experience the highest poverty rates.

It is necessary to focus on divorced and never married elderly women both because they are at greater risk of poverty and because the proportion of women who will fall into these categories when they become aged is growing (data were not available for separated women). Research by the Social Security Administration shows that divorced and never-married women are increasing as a proportion of elderly women. The study found that 3.8 percent of women born during the depression era (1926-1930) who lived to age 62 had never married and 9.5 percent were divorced (Table 2). By comparison, the study projects that 7.7 percent of women born during the baby boom (1946 and 1964) will not have been married and 19.1 percent will be divorced. Moreover, the proportion of widows is projected to decline from 20.9 percent to 13.9 percent.

Table 2

The Projected Marital Status of All Women at Age 62 (Percent)


Born 1926-1930

Born 1946-1964

Never Married















Source: Barbara Butrica, Lee Cohen, and Howard Iams, "Introduction and Findings from the MINT Project," Prepared for Presentation at the First Annual Joint Conference for the Retirement Research Consortium, May 1999.

Elderly Women of Color

In addition to examining the financial well-being of elderly women by marital status, it is important to disaggregate this population by race and ethnicity. When this is done, it becomes clear that women of color are some of the elderly people most vulnerable to poverty. Before receiving Social Security, 52.4 percent of white non-Hispanic (hereafter referred to as white) women age 65 and older were poor in 1993-1997 compared to 65.9 percent of African-American non-Hispanic (hereafter referred to as African-American) and 60.4 percent of Hispanic elderly women.(4) Social Security benefits substantially reduce poverty for each of these groups, but the proportion of elderly women in poverty was nearly three times greater for African Americans (34.8 percent) and Hispanics (33.7 percent) than for whites (12.7 percent).

Furthermore, the proportion of African-American women who will be unmarried at age 62, according to Social Security's projections, also will rise over time and will be substantially higher than the proportion for white elderly women. Table 3 shows never married African-American women will increase from 5.1 for those born during the depression era to 18.6 percent for baby boomers. The proportion of elderly divorced women will grow from 14.8 percent for depression era African Americans to 24 percent for African-American baby boomers. The proportion of never married 62-year-old African-American baby boomers is more than two times that of whites. Thus elderly unmarried African-American women face a triple threat. Their race, gender, and marital status increase the possibility that they will be poor.

Table 3

The Projected Marital Status of African American Women at Age 62


Born 1926-1930

Born 1946-1964

Never Married















Source: Barbara Butrica, Lee Cohen, and Howard Iams, "Introduction and Findings from the MINT Project," Prepared for Presentation at the First Annual Joint Conference for the Retirement Research Consortium, May 1999.

Solutions in Addition to Improvements for Widows are Needed

Raising the Social Security benefit for widows is necessary but not sufficient to reduce poverty among elderly, single women. Receipt of 75 percent of what couples would have received (as recommended by the majority of members of the Advisory Council on Social Security) will remove some widows from poverty, but leave many others below the poverty line.(5) Furthermore, women who never married (or were married for less than 10 years) will not be assisted by this change. Additional steps are needed to raise the income of unmarried elderly women.

Fortunately, there are alternatives for improving benefits for unmarried elderly women that will not incur higher costs for the Social Security program. Rather than relying solely on the Social Security system to improve the financial well being of unmarried elderly women, adjustments should also be made in the Supplemental Security Insurance program (SSI). SSI was established in 1972 as a means-tested and federally administered program that provides cash benefits for low-income aged, blind, and disabled individuals. Changes can be made in SSI that will improve the income level of poor, elderly households.

There is a second reason to modify the SSI program. If surviving spouse benefits are improved as recommended, some widows who would have been eligible for SSI under the current Social Security rules would become ineligible if they received 75 percent of the couples' benefit. Medicaid eligibility for the elderly is tied to the receipt of SSI in most states (in some states, Medicaid eligibility criteria are more restrictive than SSI eligibility rules). Thus, a widow whose benefit rises as a result of an increase in the surviving spouse benefits might lose her health care coverage due to her higher income. Adjustments should be made in the SSI program to prevent the loss of medical benefits when Social Security for surviving spouses benefits are raised.


Options for Improving the Supplemental Security Income Program

Increase the Income Disregard for Supplemental Security Income (SSI)

An elderly woman may become poor as the result of a catastrophic event such as the death of her husband, but a study published by the Social Security Administration found that the most important determinant of poverty among elderly women is their poverty status prior to reaching old age.(6) Women who experience spells of poverty at younger ages are more likely to be poor when they get older. Women who did not experience poverty are not likely to become poor when they are elderly, even after a catastrophic event. This research suggests that women who have been in the labor market but earned low wages and were poor prior to retirement are more likely to be in poverty when they are elderly. Similarly, women who were married to men with low wages may be at greater risk of poverty when they grow old.

The SSI program assists elderly individuals who are susceptible to poverty. To be eligible for the program an individual must be at least 65 years old, blind, or disabled. Program eligibility is also based on income limits (eligibility requirements concerning assets will be discussed in the next section). SSI is intended to be a "program of last resort," and nearly all other income an applicant receives is considered before SSI eligibility and the benefit level are determined.(7) Individuals and couples are eligible for SSI if their countable incomes fall below the federal maximum monthly SSI benefit, which was $500 for individuals and $751 for couples in 1999.(8) Not all income is counted in determining SSI eligibility. Twenty dollars per month of unearned or earned income is excluded. An additional $65 of earned income plus 50 percent of any remaining earnings are also excluded. This is called the income disregard. By way of example, an elderly individual whose only source of income is a Social Security benefit of $505 would be eligible for a SSI benefit of $15. (The Social Security benefit of $505 minus the $20 income disregard equals $485. When the $485 is subtracted from the SSI maximum benefit of $500, the remaining $15 is the benefit amount.)

The SSI program is an important source of income for the elderly, but the program can be made more effective in reducing poverty by increasing this income disregard. The $20 disregard was established when the original SSI law was enacted in 1972. It has not been adjusted since then to keep pace with inflation.

One consequence of maintaining such a low income disregard is that a retiree who worked steadily but earned low wages could have a combined Social Security and SSI benefit that is only slightly larger than the SSI benefit the retiree would have received if he or she had not worked at all. For example, Ms. Harris worked hard all of her adult life but she earned the minimum wage throughout her work life. The jobs she held were physically arduous, and she retired at age 62 in 1996. Ms. Harris' only source of income was Social Security until she turned 65 and became eligible for SSI benefits. Her Social Security benefit was $497 in 1999.(9) Therefore, she received an SSI benefit of $23 per month making her total income $520 (Figure 1). If Ms. Harris had not worked at all, and had no Social Security income, she would have received a SSI benefit of $500. Her hard work reaped only $20 more per month than not working, and her income level fell well below the poverty threshold. This is inconsistent with the bipartisan goals of encouraging and rewarding work.

Figure 1

Example of the Need to Make Work Pay

Ms. Harris, a minimum wage worker, retired at 62 and received a reduced Social Security benefit. At age 65, she became eligible for SSI.

Social Security benefit      $497
SSI income disregard        -  20
Adjusted Gross Income     $477

Maximum SSI benefit         $500
Adjusted Gross Income      -477
SSI benefit                         $ 23

Social Security benefit        $497
SSI benefit                         + 23
Total Income                      $520

If Ms. Harris had not worked at all, she would have received a benefit of $500 from SSI. Her years of work have earned her only $20 per month more than she would have received if she had not worked.

A principle that has had bipartisan support is the idea that individuals who work should not be poor. Toward that end, Presidents Reagan, Bush, and Clinton and members of Congress have successfully pursued the development and improvement of programs such as the Earned Income Tax Credit (EITC) to increase the income of the working poor. Indeed, President Clinton has proposed to include an expansion of EITC in the budget for 2001. In that same vein, women who have worked hard but received the minimum wage for the better part of their working lives and women who have taken time out of the labor market (or worked part time) to raise children or care for an infirm elderly relative should not be consigned to a life of poverty in their later years.

One means of raising the level of income for women with a history of low wages is to increase the income disregard for unearned income.(10) Raising the income disregard would reduce the amount of Social Security income counted in determining SSI eligibility and benefits. Consequently, SSI benefits would rise. If the disregard were adjusted to account for inflation since 1972, the updated amount would be approximately $80.(11) An income disregard of this level would substantially improve the financial well-being of low-income elderly women.(12)

The $80 income disregard also would preserve SSI eligibility and, therefore, Medicaid coverage for some elderly women. For example, Mrs. Carver is the widow of a worker who received the minimum wage throughout his work life. Prior to his death, Mr. Carver worked until age 62, retired in 1996 and began receiving Social Security benefits. Mrs. Carver received spouse benefits based on her husband's earnings. When the Carvers turned 65 in 1999 they had a Social Security benefit of $731 and were eligible for an SSI benefit of $40, bringing their total income to $771 (Figure 2). After Mr. Carver died, Mrs. Carver's Social Security benefit fell to $497 (100 percent of her husband's benefit) and she received $23 from SSI. If Mrs. Carver's survivors benefit was increased to 75 percent of what the Carvers would have received, she would receive $548 per month in Social Security benefits. While this would improve her financial status, her income would still be substantially below the poverty line. Moreover, she would exceed the income limit for SSI and she would lose her eligibility for both SSI and Medicaid. If the SSI income disregard were raised from $20 to $80, Mrs. Carver would again be eligible for SSI and would receive a benefit of $32 per month making her total income $580 per month. Moreover, she would maintain her Medicaid coverage.

No official estimates of the cost for increasing the SSI income disregard have been released to date. However, based on the number of elderly SSI participants, including aged, blind and disabled beneficiaries, who are receiving Social Security (and other unearned income) and the number of Social Security beneficiaries who could be made eligible for SSI under a higher income disregard, it appears that the added cost to SSI would be approximately $3 billion per year.(13) In addition to this cost, Medicaid costs will rise as the number of newly eligible SSI participants rises, since SSI participants are categorically eligible for Medicaid in most states. Again, no official cost estimates are currently available, but for the purpose of this analysis, estimates have been generated based on Medicaid costs for aged, blind and disabled enrollees.(14) The federal share of the Medicaid cost for acute care would be approximately $2 billion per year.(15) Both the SSI and Medicaid cost estimates provided here are only intended to give a sense of the magnitude of the costs and should not be interpreted as exact cost levels.

While the combined annual SSI and Medicaid cost of about $5 billion is not inconsequential, it represents a relatively small portion of the projected non-Social Security federal budget surplus over the next ten years.

The cost for this option could be reduced by targeting the increased disregard to the elderly and applying it solely to Social Security income. The previously noted estimates include the costs for raising the income disregard for the blind and disabled, as well as the elderly. Additionally, the estimates cover the cost of disregarding non-Social Security unearned income, such as veterans benefits, railroad retirement and employment pensions. If the $80 disregard is limited to Social Security benefits received by the elderly, the SSI cost would be cut in half and the Medicaid cost would fall by at least 30 percent.

Figure 2


Mrs. Carver is the widow of a minimum wage worker who retired at age 62. When the Carvers turned 65 they became eligible for SSI and had the following income.

Social Security benefit      $731
SSI benefit                        + 40
Total Income                     $771

When Mr. Carver died, the following adjustments were made to Mrs. Carver's income.

Social Security benefit      $497
SSI benefit                        + 23
Total Income                     $520

If Mrs. Carver received a Social Security survivors benefit equal to 75 percent of what the couple would have received, she would have $548 Social Security benefit, but she would be ineligible for SSI and consequently she would lose Medicaid. By contrast, if the SSI income disregard was raised to $80, Mrs. Carver would maintain her eligibility for SSI and Medicaid and she would have a larger total income.

Social Security benefit        $548
SSI income disregard         - 80
Adjusted Gross Income      $468

Maximum SSI benefit          $500
Adjusted Gross Income     - 468
SSI benefit                          $ 32

Social Security benefit         $548
SSI benefit                          + 32
Total Income                       $580

As noted, the cost of improvements to the SSI program will not impact the solvency of Social Security. SSI is funded through general revenue. Payroll taxes would not be used to cover any SSI costs.


Adjust the Asset Limit for SSI

To qualify for the SSI program, individuals must meet the asset limit as well as the income limit. The asset limit is currently $2,000 for an individual and $3,000 for a couple. The last legislative change in the asset test occurred in 1984, when legislation raised the resource limits in stages between 1985 and 1988. There has not been an increase in the resource limit in more than a decade, although the cost-of-living has climbed over 40 percent since 1988.

Increasing the asset limit would make it possible for more low-income retirees to qualify for SSI and further reduce poverty among the elderly. An adjustment could be made in one of two ways. The resource limit could be increased by a flat amount, as was done in the past. (The 1984 legislation gradually raised the asset limits from $1,500 to $2000 for individuals and from $2,250 to $3,000 for couples.) Alternatively, the asset limit could be increased each year based on the change in the Consumer Price Index. This would be consistent with the treatment of SSI benefits, which are updated using the CPI.


Exclude Defined Contribution Plan Balances from the SSI Asset Test

Defined contribution plans, or retirement plans that are based on contributions of workers and employers to individual accounts, may be part of Social Security and pension reform legislation. This legislation may take the form of Universal Savings Accounts (USAs) that would be created outside of the Social Security system, as proposed by the Clinton Administration, or individual accounts that replace a portion of Social Security, as has been proposed by several members of Congress. If such accounts are created, Congress and the President should exempt account balances from counting as assets in SSI and other means-tested programs.

Just as increasing Social Security survivors benefits can have the unintended consequence of pushing elderly individuals over the income limit for SSI, the creation of individual accounts can push some elderly individuals over the asset limit for SSI, Medicaid and food stamps. Under current law, the asset tests for SSI, Medicaid and food stamps exclude some resources including an individual's home, household goods, and at least a portion of the value of an automobile, as well as assets that are not accessible such as pensions. But individuals with very low incomes would be made ineligible for these means-tested benefits if such accounts were not excluded and the total countable assets of these individuals above the maximum levels allowed.

Such policies contain perverse incentives. Failure to exclude balances of defined contribution accounts from asset tests in means-tested programs create an incentive for poor elderly individuals to withdraw their funds from their accounts and spend them. Only then would they be eligible for SSI, Medicaid and food stamps. Moreover, workers who experience temporary periods of need, such as during a recession, will be forced to liquidate and spend the retirement savings they have managed to accumulate — and to pay substantial early withdrawal and often tax penalties — to be eligible for food stamps or Medicaid during the economic downturn. Some workers who are hard-pressed during a downturn — and who withdraw most of the funds in their accounts because they cannot receive means-tested assistance until the accounts are spent down — could reach retirement with little left in their accounts.

The primary assets limits in the major means-tested benefit programs were developed in the 1970s, when employer-sponsored defined contribution plans were rare, especially for low-wage workers. (Some employers had defined-benefit pension plans; others offered no retirement plans.) The asset tests in most means-tested benefit programs effectively exempt pension benefits that workers have accrued in defined-benefit plans from counting as assets but do not contain a similar exemption for defined-contribution accounts, especially if early withdrawal is allowed (even with a penalty).

In recent years, an increasing number of employers have replaced defined-benefit plans with defined-contribution plans. Women have been expanding their participation in the labor market at the same time that employers have been substituting defined contribution plans for defined-benefit plans. While there still are relatively few low-wage workers with defined-contribution plans, this number is likely to grow over time. As the number of low-income workers with defined-contribution plans grows, an increasing number of workers may lose means-tested benefits if the account balances are counted as assets.

Because defined-benefit pension funds are not accessible while withdrawals generally can be made from defined-benefit contribution plans, current law discriminates against low-income retirees whose employers participate in a defined contribution retirement plan as compared to retirees whose employers provide a defined-benefit plan. Low-income retirees with retirement accounts (as opposed to pensions) generally must withdraw most or all of their accounts and spend those assets down regardless of any early withdrawal penalty or tax consequences before they can qualify for means-tested programs such as SSI, Medicaid and food stamps.

Forcing low-income workers and retirees to deplete their savings before they can access means-tested benefits runs counter to efforts to encourage low-income workers to save for retirement. This is not sound policy. Federal policy should encourage low-income elderly individuals to withdraw funds from their retirement accounts gradually over their remaining years so that sufficient funds remain to avert severe poverty when they become very old. This is particularly important for averting high rates of poverty among elderly women.

There still are relatively few low-wage workers today with defined-contribution plans, so these aspects of the assets rules of means-tested programs are not invoked much. Few people lose mean-tested benefits for this reason. As a result, making this change should have little cost in the next five or 10 years.

Congress and the Administration could address these problems through rules that apply to USAs or other private retirement accounts and to employer-sponsored defined contribution plans and that work as follows:

Such an approach is critical if individual accounts (whether in the form of USAs or other types of individual accounts) and employer-sponsored defined contribution plans are to help low-income workers save for retirement and help low-income retirees have adequate income that lasts into very old age.



Elderly women are not a monolith. This population comprises married women who fare relatively well economically, unmarried women who are at greater risk of poverty and women of color whose race, gender and marital status make them substantially more susceptible to poverty than other groups. Social Security reform should encompass not only measures that will improve the economic well-being of widows; it must also embrace changes that will reduce poverty for other unmarried women. Improvements in SSI are needed to advance the economic status of unmarried elderly women and to prevent low-income women from being made ineligible for SSI, and consequently Medicaid, by raising survivors benefits.

End Notes:

1. These data are the result of analyses by the Center on Budget and Policy Priorities using 1998 Current Population Survey data collected by the Bureau of the Census. In this report, the phrase " without (or before) Social Security" means after counting social insurance benefits other than Social Security (such as federal pensions and unemployment insurance), but without counting any other government benefits

2. Analyses of elderly women by marital status typically combine divorced and separated women due to the relatively small sample size for separated women. That problem was avoided in this paper by combining five years of Current Population Survey (CPS) data to increase the sample size. CPS data for 1994 through 1998 were combined for a total sample size of 850 elderly separated women.

3. Widows comprised 79.4 percent of unmarried elderly women, divorced women made up 11.7 percent and never-married women made up 7.4 percent of this group.

4. These data are the result of analyses by the Center on Budget and Policy Priorities using 1993-1997 CPS data collected by the Bureau of the Census.

5. Report of the Advisory Council on Social Security, Volume I: Findings and Recommendations, January 1997.

6. Sharmila Choudhury and Michael v. Leonesio. "Life-Cycle Aspects of Poverty Among Older Women," Social Security Bulletin. Vol. 60, No. 2, 1997.

7. Committee on Ways and Means, U.S. House of Representatives. The Green Book. Washington, DC: U.S. Government Printing Office, May 1998.

8. These levels were just raised to $512 for an individual and $769 for a couple in January 2000.

9. In 1996 Ms. Harris would have received a Social Security benefit of $467. Her benefit would increase annually as a result of the cost of living adjustment and would be approximately $497 in 1999. See Social Security Administration . Annual Statistical Supplement to the Social Security Bulletin, 1997, Washington, DC: The Government Printing Office, December 1997, Table 2.A.26, p. 69.

10. Social Security benefits make up 91 percent of the unearned income received by SSI participants to which the income disregard is applied. Other sources of unearned income include veterans benefits, railroad retirement, black lung benefits, employment pensions, worker's compensation, support and maintenance in kind, support from absent parents, asset income, and assistance based on need. See Committee on Ways and Means U. S. House of Representatives, 1998 Green Book, Washington, DC: U.S. Government Printing Office, 1998, p. 300.

11. Congress passed legislation in 1972 that established the SSI program and designated 1974 as the initial year of benefit payments. The maximum benefit levels of $130 for individuals and $195 for couples were chosen by Congress in 1972 to be effective in 1974, however , provisions were passed in 1973 that created two benefit increases in 1974. Maximum benefit levels were $140 for individuals and $210 for couples on January 1, 1974 and rose to $146 for individuals and $219 for couples on July 1, 1974 . Congress established a cost of living adjustment for SSI benefits in 1974 that is indexed to the Consumer Price Index. Thus, maximum benefit levels rise each year. No similar adjustments were made for the income disregard. The 1973 provisions did not include an increase in the disregard for 1974 and the income disregard was not indexed for inflation. Comparable treatment of benefit levels and the income disregard would require an adjustment in the disregard for inflation since 1972. See Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 1998. Washington, DC: The Government Printing Office, November, 1998, Table 2.B, p. 86 and Table 2. B1, p. 92.

12. If unmarried, elderly individuals receive the $80 unearned income disregard, bringing their total incomes up to $580 (if they have no other source of income), and they also receive a food stamp benefit of $20 (the amount for which these individuals would be eligible if they have the average shelter cost, the standard deduction, and no other deduction), their income of $600 per month would be 90 percent of the projected, official poverty threshold for 1999. The National Academy of Science (NAS) has recommended revising the official poverty threshold to account for factors not captured by the current measure. NAS has provided examples of poverty thresholds based on its recommendations. An income level of $600 would exceed the lower and intermediate estimates of these poverty thresholds developed by NAS (in 1999 dollars) . See Constance F. Citro and Robert T. Michael, ed., 1995, Measuring Poverty: A New Approach, Washington, DC: National Academy Press, p. 251.

13. Social Security Administration, 1998. op. cit. Tables 5B6, p. 209; 5.B9 p. 212; 5.D2, p.216, 5.F1, p. 221; 5.F3, p.222; and 7D1, p. 298. See also "Background Materials on Certain Income Security Programs," Congressional Budget Office memorandum, January 29, 1999.

14. Estimates were derived using data provided by the Urban Institute on 1997 Medicaid costs for aged, blind and disabled enrollees who were receiving cash assistance.

15. Acute care includes costs for inpatient and outpatient care, physicians, lab work, x-rays, prescriptions and payments to managed care providers.