May 13, 2009
Featured Topic: Social Security
The Social Security trustees’ annual report, released yesterday, has reignited concerns about the program’s precarious finances. With about 9 of 10 adults age 65 and older relying on Social Security, its financial health is critical to older Americans’ economic security.
A commentary on fixing Social Security presents lessons learned from past, failed attempts. We also summarize various options for reform and present estimates of their distributional effects in Revitalizing Social Security. Other new analyses focus on financial hardship before and after Social Security eligibility, a new minimum benefit to enhance the program’s adequacy, and the impact of wage growth on Social Security revenues.
Social Security Reform
Financial Hardship before and after Social Security’s Eligibility Age
Many people fall into poverty as they approach 62, Social Security’s early eligibility age. Among those who did not complete high school, poverty rates increase by 36 percent between age 52-54 and age 60-61. Poverty rates decline after age 62 when most people qualify for Social Security.
(Research Report)
A New Minimum Benefit for Low Lifetime Earners
Despite working hard for most of their lives, many workers end up poor in retirement. An enhanced minimum Social Security benefit that targets long-career workers with low lifetime earnings, plus a modest credit to compensate workers who spent up to three years out of the labor market, would increase the number of adults retiring with a secure financial foothold. (Research Report)
Rising Tides and Retirement: The Aggregate and Distributional Effects of Differential Wage Growth on Social Security
Because only earnings below the taxable maximum are subject to payroll taxes, concentrated wage growth among higher earners generates less revenue than more evenly distributed growth. Yet, Social Security’s progressive benefit formula increases benefit payouts when low-wage workers’ earnings stagnate. Relatively modest changes in wage growth differentials could significantly alter projected Social Security benefits and financing. (Research Report)
Return to newsletter home page.
