How has the COVID-19 pandemic exacerbated concerns among older Americans about maintaining a secure retirement? Social Security alone was never originally intended to be the only source of income in retirement. It is frequently referred to as one of the legs of a “three-legged retirement income stool.” Savings and pensions are the two other major sources of income for retirees. But few retirees these days have access to a defined benefit pension, and the pandemic has affected many retiree’s savings for the worse. This leaves an increasing number of beneficiaries reliant on Social Security for most, or even all of their income in retirement.
In 2019, the income of people aged 65 and up was about $47,357 for those whose incomes are right in the middle. But how well did these same people do in 2020? Half of all participants in TSCL’s recent Senior Survey (conducted from January through March of this year) report that their retirement savings had not recovered to the December 31, 2019 level, as of December 31, 2020, despite the stock market ending at record highs.
Various sources indicate that the number of retirees with income from pensions has declined dramatically over the past decade and, instead, more retirees depend on earnings from jobs. Yet one out of four, 25%, of participants in TSCL’s Senior Survey conducted earlier this year said they lost earnings in 2020 due to COVID-19 illness or business shut downs. In fact, some retirees are reporting that they are planning on working longer in retirement to make up for losses in savings due to the pandemic.
The COVID-19 pandemic has brought home an important fact. Social Security benefits are less affected by recessions or pandemics than are retirement account savings, pensions, or jobs. Social Security is our nation’s most important source of retirement income. Its beneficiaries have paid for it during their working careers. In turn Social Security pays benefits as long as they live.
There are still some policy makers who falsely argue that Social Security “overpays” retirees because annual cost-of-living adjustments (COLAs) are too generous. And there are still some who argue that Social Security benefits must be cut because the system faces a long-term funding shortfall.
Social Security benefits and COLAs are not overly generous. They are only modest at best. In fact, when compared with Social Security systems in 35 other developed nations, the U.S. ranks in the lowest one third. Two thirds of other developed countries have more generous public pensions than the U.S., according to the Organization for Economic Cooperation and Development.
How are retirees changing plans and household budgets in response to the pandemic’s impact on retirement savings and jobs? Please take TSCL’s new 2021 Retirement Survey. Your answers help Members of Congress understand the importance of strengthening the three-legged retirement stool: Social Security, keeping our economy strong to provide growth in retirement savings, and to ensure jobs are available for all who want to work, run a business, or otherwise contribute to our economy in retirement.
Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic (ASEC) Supplement, March 2021.