Thursday, September 1, 2011

Social Security Provides Majority of Income for About Two-Thirds of Seniors

Given all the talk about “rescuing” the country from escalating entitlement costs, we should give thanks to the Economic Policy Institute (EPI) for continuing to put economic issues in perspective.

Social Security is a favorite target for the budget cutters because there are numerous options available. One should also be mindful that the deficit can be addressed with additional revenue—with many choices available also. EPI provides us with some data to consider in evaluating the options before us.

“The average annual Social Security retirement benefit in 2009 was $13,406.40, slightly above the $10,289 federal poverty line for individuals age 65 and older, but less than the minimum wage. While modest in size, Social Security benefits comprise a substantial share of household income for most elderly recipients. Originally designed to complement savings and retirement income, Social Security has instead become the primary source of income among this group.”

This chart is provided.

It is surprising how dependent the senior population is on their social security benefit. It is only for the top quintile—more precisely the top 10%—that the benefit becomes of marginal necessity. It would be of interest to see an analysis of how this dependence is expected to evolve over time. Many of those over 65 now are still covered by pension plans—which will not be available to the next generation. With effective incomes falling for most citizens, it is not clear how many will be able to save significant amounts for retirement. It would not be surprising to find that the social security benefit will become even more important for retirees as time goes by.

Viewing these numbers should convince one that social security is too modest a program as it is now. It should be strengthened, not cut back. There are the means to do that. There will be more to come on this topic.

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