Say what you will about the program, it continues to do what it promised to do: keep the elderly from poverty. While we spend a great deal of time, both here and on other publications concerned about the state of retirement, Social Security is still the deciding factor for an increasingly large segment of the population.
A recent survey released by the Employee Benefits Research Institute reveals some chilling realities that many of us who are currently working do not want to accept. The research done by Ken McDonnell, based on information available in 2008, shows a heavier than anticipated reliance on the program by those 65 and older. With 89 percent of the population receiving benefits, almost 40% of the total income in these households was from Social Security. (Other income sources from the Census Bureau points to 19.7% from pensions and annuities, 13% from assets and income from earnings at 25.6%.)
There are some caveats in the report. The vast majority of the income that these folks receive from Social Security is paid to the most elderly in the population with the group aged 65-74 receiving more income from their working years as a primary source of their retirement income. But the benefits came as a result of a long stretch of prosperous investments between the years 1984 and 2000.
Income earned during the working years also played a role in how and who used the program. Those in the lowest income quintile relied much more on Social Security than those in the highest income group. This was offset by an almost 40% reliance on income from investments.
Non-married people received a higher portion of their retirement income from SS with elderly women receiving almost 50% of what they needed. But their is a shift away from this dependence on the program and an increasing number of women entering retirement spent a significant number of years in the workforce and contributed to their own retirement plans.
Sen. Herb Kohl (D-WI), Chairman of the Senate Special Committee on Aging recently proposed modest changes to the programs that in his words would ” ensure solvency and even strengthen benefits for those who count on their monthly check the most”. What might come as a surprise to many, Social Security does not contribute to the deficit.
Chairman Kohl told fourteen members of President Obama’s National Commission on Fiscal Responsibility and Reform”Social Security has never been responsible for one penny of the federal deficit, and by law is barred from doing so. In fact, it has had a surplus every year since its inception”.
While the demographic tapping the program has changed significantly since it began, the changes needed to amend the plan should take into account that increased lifespan of individuals, fewer potential workers contributing to the plan, and more significantly, fewer pensions. But on the other side of the equation is the increased number of women in the workforce.
How is still a problem. A recent study conducted by the Center for Retirement Research suggests that a more equitable way to keep the program solvent would be to shift the tax structure from payroll to income. This would serve as a way to keep from penalizing the lowest income group creating a legacy debt that woud be distributed more broadly.
For a Downloadable pdf from the Senate Aging study and for the 2009 study from the CRR
Related posts: