By Sue Pleming

WASHINGTON (Reuters) - Americans older than 50 are better off than 20 years ago but many are ill-prepared for old age, with only a third having private pensions and Social Security amounting to more than half of their retirement income after 65, says a report released on Wednesday.

The report by the AARP, a lobbying group for people older than 50, also found growing inequalities between the rich and the poor in old age, with many low-income people relying solely on Social Security benefits from the government.

"The report shows an improving situation for those over 50 but there is a major gap between those who have assets and those who don't," AARP director John Rother told a news briefing to release the report. The AARP was formerly known as the American Association for Retired Persons.

The biggest single area of concern, Rother said, was among the lowest 25 percent of wage-earners in the 50-61 age range who had poor wages, no pension coverage, no health insurance and were less likely to own homes.

Entitled "Beyond Fifty, A report to the Nation on Economic Security," the report looks at the overall well-being and economic security of America's 50-plus population, which is increasing as a share of the total population.

In 2000, about 76 million Americans -- or 28 percent -- were older than 50 and by 2020 there will be 40 million more in that group, amounting to 36 percent of the population.

Net worth increased 36 percent among 50-plus America between 1983 and 1998, fueled by a boom in the stock market. But these gains were not shared across the board.

Income grew 17 percent from 1980 to 2000 among people 50 and older, but it grew substantially faster in the top income group with a 28 percent rise versus the lower income group at 11 to 20 percent, the report said.

"The haves are those who have enjoyed cumulative advantages of higher-wage jobs with employer based pensions and health-insurance coverage, allowing them to save more on their own for retirement," the AARP said.

Of low-income people aged 50 to 61, the AARP said 60 percent were women and 30 percent were black or Hispanic. Nearly one-fifth of this group's income came from Social Security and another one-quarter from other programs.

Their net worth was less than $6,500 in 2000 and their homeownership rate declined by five percentage points. While 14 percent of the pre-retirees had no health insurance, the rate was more than twice as high among the lowest-income group.

GREATER RELIANCE ON SOCIAL SECURITY
Social security, the AARP said, was never meant to be the main source of retirement income. However, it provided 90 percent or more of the total income for 27 percent of the population over age 65 in 1998, up from 23 percent in 1980. Social Security kept 40 percent of people over 65 out of poverty and made up more than half of most Americans retirement income, the report added. Social Security was the sole source of retirement income for 17 percent of those over age 65. Marcia Greenberger, founder of the National Women's Law Center, said Social Security was particularly important for women and that without it more than half of all elderly women would be living in poverty. "To replace Social Security would be a financial disaster for women," said Greenberger, adding that nearly two-thirds of women over 65 received half their income from these benefits. Private pensions, the AARP said, needed to be made more widely available to workers and pension levels increased. In addition, the government could help low-income people by offering tax incentives for those saving for their retirement. More people are working past the age of 62, the earliest age of eligibility for retirement benefits, and the AARP said there needed to be more safeguards against age discrimination in the labor force. The AARP said a fourth pillar -- health insurance -- needed to be added to the traditional three-legged stool of retirement income which consists of Social Security, savings and pensions. The rapid rise in health care costs posed a big problem to America's elderly, with out-of-pocket health costs amounting to an average 19 percent of income for over 65-year-olds.