Modernizing Social Security: Helping the Oldest Old

People become more financially vulnerable the longer they live and the odds of living to advanced ages are growing as average life expectancy rises. In response, policy experts have proposed improving benefits for the “oldest old” (defined here as those ages 85 and over). The two main options are: 1) base the annual cost-of-living adjustment (COLA) on a price index that more accurately reflects the spending patterns of older Americans; or 2) introduce a targeted benefit adjustment at age 85. This brief on helping the oldest old is the fourth in a series on modernizing Social Security to account for changing social, economic, and demographic circumstances. The discussion proceeds as follows. The first section describes poverty patterns by age. The second section examines the two options for reducing poverty risk at advanced ages: using a Consumer Price Index for the elderly and adjusting benefits at 85. The third section assesses the reforms based on three criteria: targeting efficiency, administrative feasibility, and cost offsets. The final section concludes that raising benefits at 85 is the more cost-effective way to target the problem of poverty risk among the oldest old and that its modest cost could be offset by a very small reduction in the COLA.