|Title||Poverty among the aged population: The role of out-of-pocket medical expenditures and annuitized assets in supplemental poverty measure estimates|
|Publication Type||Government Report|
|Year of Publication||2018|
|Authors||Chopik, WJ, Wimer, C, Betson, DM, Manfield, L|
|Publisher||Social Security Bulletin|
|Keywords||Annuitization, Medical Expenses, Out-of-pocket payments, Poverty|
We examine the extent to which the Supplemental Poverty Measure (SPM) overestimates the poverty rate of the aged population because it does not account for asset holdings. Following a conservative annuity approach, we use 2010 Health and Retirement Study data to estimate high and low bounds of potential annuitized asset withdrawals and then recalculate 2009 SPM poverty rates. Including annuitized asset principal in family resources reduces the estimated SPM poverty rate for the aged, especially among those who are in poverty because of medical out-of-pocket expenditures. For example, between 30.8 percent and 45.2 percent of the latter group would be reclassified as not SPM poor if they were to annuitize their financial assets. To better represent available family resources, poverty measurements for the aged should incorporate (at minimum) the conservative estimates of available assets produced by the bounded-annuity approach.