Does Social Security Provide Enough Income For Today’s Retirees?
More people than ever face a lower standard of living in retirement, according to a growing number of troubling new studies. There are several reasons why this is occurring:
- More Americans are spending more years in retirement, but have little or no retirement savings. Fewer employers are offering retirement plans and participation from workers is low among those who do. According to a study by the Schwartz Center for Economic Analysis at the New School, the median net worth among households near retirement (ages 55 to 64) show that only about a quarter can expect an adequate cash income stream from their retirement savings.
- A growing number of workers expect to rely heavily on Social Security for most of their income, but three-quarters of current retirees are receiving reduced benefits. The retirement age is gradually rising to 67 and, by taking benefits when first eligible at age 62, beneficiaries settle for permanently reduced benefits. Delaying benefits until “full retirement age” or thereafter is the best way to maximize benefits. For example at full retirement age retirees due a monthly benefit of $1,000 would receive only $750 at age 62 if they took it. Individuals who can continue to work and delay retirement until 70 can receive a benefit $1,320 instead. But even the individuals who wait until age 70 to allow benefits to grow to their maximum, would still be living close to the federal poverty level if Social Security is their only income.
Social Security provides an essential foundation to American’s retirement plans, but it simply was never designed to be the sole source of retirement income. Social Security replaces about 40% percent of earnings of the typical retiree. TSCL believes that today’s retirement crisis calls for more adequate, not reduced, benefits.
Legislation introduced by Senator Bernie Sanders (VT) and a similar bill introduced by Representative John Larson (CT-1 ) would provide a boost in Social Security benefits by about $65 to $70 for most recipients, would increase cost of living adjustments (COLAs) by basing the increase on the CPI-E. It would pay for the expanded benefits and restore long - term solvency to the program by making the wealthiest Americans pay their fair share of taxes. Under current law those earning more than $118,500 pay nothing on earnings over that amount.
Many in Congress talk about the need to “strengthen Social Security,” but few offer proposals that would both improve program financing and at the same time improve retirement income. We encourage you to attend town halls this summer and to tell your Members of Congress that Social Security’s solvency doesn’t require benefit cuts. What Social Security needs is greater tax fairness and requiring all to pay their fair share.