Economic Well-Being

The retirement savings of American households took a big hit when the stock market crashed in 2008. Recently, however, a good portion of these losses has been reversed. This fact sheet follows trends in retirement account balances since the beginning of 2005.

Social Security claiming behavior matters because early claimants receive lower monthly benefits for the rest of their lives. Early claiming fell over the past decade, after increasing over the previous 10 years. However, high unemployment encourages early claiming by less-educated men. A 1 percentage point increase in the state unemployment rate is associated with a 0.4 percentage point increase in the monthly claiming probability by men who never attended college, implying that the Great Recession boosted their claiming rates by about 40 percent. In contrast, claiming behavior by women and well-educated men is not significantly correlated with the unemployment rate.

Women's labor force participation and earnings dramatically increased after World War II. Those changes have important implications for women's Social Security benefits. This article uses the MINT model to examine Social Security benefits for current and future beneficiary wives. The projections show that fewer wives in more recent birth cohorts will be eligible for auxiliary benefits as spouses because their earnings are too high. Most wives will still be eligible for survivor benefits because they typically have lower earnings than their husbands. The share of wives who would be ineligible for widow benefits is projected to double between cohorts.

As national attention turns to the federal deficit, some policymakers have proposed reforms to Medicare, Medicaid, and Social Security that could have significant implications for current and future generations of Americans. This data brief describes the income and assets of the current Medicare population, and examines the extent to which income and assets are likely to be higher for the next generation of beneficiaries. For most of the next generation of Medicare beneficiaries, average incomes will be moderately higher than the incomes of the current beneficiaries, after adjusting for inflation; however, the projected growth is concentrated in the upper incomes.

Proposals to raise premiums for higher-income Medicare beneficiaries are currently being discussed along with other options to reduce federal spending on Medicare. This brief describes current law with respect to the income-related Medicare Part B and Part D premiums. It also describes how new proposals would increase the share of beneficiaries who would pay the higher premium, and the amounts that they would pay. Given the relatively low incomes of most people on Medicare, significant savings from such proposals are only possible by going relatively far down the income scale to reach a sizeable share of beneficiaries.

This article examines how retirement income is likely to change for boomers and persons born in generation X compared with current retirees. We use the MINT model to project retirement income, poverty rates, and replacement rates for current and future retirees at age 67. We find that retirement incomes will increase over time, and poverty rates will fall. Projected income gains are larger for higher than for lower socioeconomic groups, leading to increased income inequality among future retirees. Boomers and GenXers are less likely to have enough postretirement income to maintain their preretirement standard of living compared with current retirees.

Minority and divorced women have historically experienced double-digit poverty rates in retirement, and demographic trends will increase their representation in future retiree populations. We might expect an increase in the proportion of economically vulnerable divorced women in the future. Factors associated with higher retirement incomes include having a college degree; having strong labor force attachment; receiving Social Security benefits; and having pensions, retirement accounts, or assets, regardless of race and ethnicity. Because divorced minority women are less likely than divorced white women to have these attributes, their projected average retirement incomes are lower than those of divorced white women.

Older divorced women are more likely to be poor than other older women, and historical divorce and remarriage trends suggest that in the future a larger share of retired women will be divorced. This article uses the MINT model to project the retirement resources and well-being of divorced women. We find that Social Security benefits and retirement incomes are projected to increase for divorced women and that their poverty rates are projected to decline, due to women's increasing lifetime earnings. However, not all divorced women will be equally well off; economic well-being in retirement varies by Social Security benefit type.

On February 22, 2012, Eugene Steuerle addressed Re-Imagining Pensions, a conference cosponsored by the Urban Institute, the Pension Rights Center, and Covington & Burling. Steuerle presented options for allowing workers to purchase annuities within Social Security, as well as granting partial benefits to accommodate phased retirement. While such options technically exist today, they are buried deep within the maze of Social Security’s complex provisions. Simplifying and clarifying these options would enable workers to provide themselves with a greater degree of inflation-protected longevity insurance in retirement.

Many boomers, the 77 million or so Americans born between 1946 and 1964, face daunting retirement challenges. Traditional employer-sponsored pensions have been disappearing, replaced by 401(k)-type plans whose payouts depend on unpredictable investment returns. The 2008 stock market crash wiped out trillions of dollars in retirement savings, and the worst housing slump since the Great Depression has suppressed home equity values. Rising health care costs and potential Social Security cutbacks add to boomers' concerns.