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Reprinted with permission from the Social Security Bulletin vol. 65, no. 3, 2003/2004, pp. 1-13.

Note: This report is available in its entirety in the Portable Document Format (PDF).

Summary

The economic well-being of future retirees in the baby-boom cohort—those born between 1946 and 1964—is of particular concern to policymakers. Social insurance in the form of Social Security benefits plays a major role of income support for the elderly in the United States. To a much lesser degree, a supplementary welfare program in the form of Supplementary Security Income also plays a role. This analysis assesses the relative contribution of those programs to the expected income of current retirees (those born in 1926 to 1935), near-term retirees (those born in 1936 to 1945), early baby-boomer retirees (those born in 1946 to 1955), and late babyboomer retirees (those born in 1956 to 1965). Their contribution is contrasted with other pillars of income, including income from nonhousing assets, imputed rent, earnings, nonspouse co-resident family members, defined benefit pensions, and other retirement investment accounts.

This analysis uses projections of the major sources of income at age 67 from the Social Security Administration's Model of Income in the Near Term (MINT) model. MINT starts with data from the U.S. Census Bureau's Survey of Income and Program Participation (SIPP) for 1990 to 1993 matched to the Social Security Administration's earnings and benefit records through 1999. MINT directly measures the experiences of survey respondents as of the early 1990s—representing the first third to the first half of the lives of the baby-boom cohort—and statistically projects their income and characteristics into the future, adjusting for expected demographic and socioeconomic changes.

The results suggest that baby boomers can expect higher incomes and lower poverty rates at retirement than current retirees have. Similar to current retirees, Social Security will account for about two-fifths of the projected family income at age 67 and will be received by almost all baby-boomer retirees. Supplemental Security Income will be received by 5 percent of current retirees and only 2 percent of baby-boomer retirees. The projections also suggest that baby boomers are less likely than current retirees to have enough postretirement income to maintain their preretirement living standards. The financial planning literature often recommends having enough postretirement income to replace 70 percent to 80 percent of preretirement income; however, over two-fifths of baby-boomer retirees will replace less than three-quarters of their preretirement earnings and almost a fifth will replace less than half of their preretirement earnings. The decline in replacement rates for baby-boomer retirees relative to those for current retirees is driven, in part, by a projected decline in Social Security replacement rates.

Note: This report is available in its entirety in the Portable Document Format (PDF).

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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