Low Social Security benefits are strongly related to individual characteristics and earnings histories. These associations suggest ways of shoring up Social Security and adopting other policies to help low-wage, low-skilled workers achieve more labor market success and greater retirement security. Social Security enhancements to aid beneficiaries with intermittent histories include caregiver credits or a minimum benefit that integrates caregiving, unemployment, and disability credits. To meet long-term, low-wage workers' needs, policymakers could adjust Social Security's bend points or replacement percentages; create a new minimum benefit; or adjust current law's special minimum benefit so it provides support greater than the poverty level.
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As proposals to close Social Security's long-term
funding gap gain attention, it's important to
understand why some older Americans end up
with low Social Security retirement benefits.
Proposals that consider up-to-date information
about whom the current system fails to shield
from poverty or near-poverty and how these
groups may change in coming decades stand a
better chance of reducing beneficiary need in
retirement. With the recent recession creating
economic hardship for many American families
and battering government budgets at all levels,
Social Security's resources must be targeted
Social Security has substantially reduced
need among older Americans. Between 1959 and
2008, the poverty rate for adults age 65 and older
fell from 35 to 10 percent (DeNavas-Walt, Proctor,
and Smith 2009). Average Social Security benefits
have increased relative to the poverty level over
the past 35 years because wages, which determine
Social Security benefits, have grown about
1 percentage point faster on average than prices
each year (figure 1). By 1982, men's average
retired worker benefit equaled the poverty level
for an individual, and by 2009 it exceeded
1.4 times the individual poverty level.1 Women's
average retired worker benefit has also grown
relative to the poverty level, although it reached
the individual poverty threshold only in 2007.
However, benefit levels vary widely, and
many receive limited Social Security payments.
In 2009, about 36 percent of retired workers and
nondisabled widows received benefits that fell
below the individual poverty level (Favreault
This brief identifies the characteristics of
Social Security beneficiaries age 64 to 73 with family
benefits below the poverty level in 2003. We
focus on these relatively young retirees because
older beneficiaries provide less useful information
about how the system should be reformed
for future generations, given the rapid change in
women's work histories and the growth of the
Social Security system. We identify factors associated
with low benefits, describe how they are
changing, and discuss what this implies for future
Social Security adequacy and reform proposals.
Data come from the Health and Retirement Study,
a large survey of older Americans with matches
to administrative benefits and earnings records.
Favreault (2010) provides additional details.2
Older Americans with limited Social Security
benefits share a number of characteristics. They
are disproportionately women, racial minorities,
and unmarried. Many spent time out of the labor
force caring for young children. Less-educated
workers are also very vulnerable, sometimes
even when they have worked long careers.
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