The headline for a front-page article in the Washington Post’s October 30 issue says that Social Security went “cash negative” this year. While Halloween weekend might be an appropriate time to scare people as they sip their morning coffee, it doesn’t set the right tone for a balanced discussion on how to “fix” Social Security. Fortunately, several new data sources on who does and doesn’t benefit from this program can guide our thinking about what could be done to preserve Social Security’s solvency without adverse effects on the most needy.

A new website launched by the Office of Retirement Policy (ORP) at the Social Security Administration contains fact sheets that show graphically who gains from Social Security. While everyone is familiar with Social Security payments as the foundation for retirement income, many don’t think about how much children benefit. ORP’s “Child Beneficiaries and Poverty” fact sheet points out that 3.2 million children received benefits in 2004 because one parent was deceased, disabled, or retired. Almost half of these children (1.3 million) would have been living in poverty without those benefits. Another fact sheet highlights who does not, and under current law will not, receive Social Security. These are more likely to be people who work infrequently, workers in occupations or industries not covered by the program, or legal immigrants who arrive too late to build up the requisite credits.

Poverty Rates with and Without Social Security Benefits, 2004

A Commission to Modernize Social Security report tells us more about those lifted out of poverty by Social Security and those who receive low or no benefits. “Plan for the Future: The Impact of Social Security Reform on People of Color,” documents the dependence of people of color on this program as a main source of income in retirement and when death or disability strikes. Many proponents of privatizing Social Security have argued that Social Security is not a good “investment” for African Americans because of their shorter lifespan. But, as the report points out, African Americans and Hispanics receive a higher rate of return when the full range of benefits, including survivors and disability payments, are considered. The authors point out that a young or low-income family could not afford to purchase, say, a $400,000 insurance policy that would provide the protection against a breadwinner’s death or disability that Social Security does. These are valuable and needed benefits, especially for the families of workers who have contributed to the economy but received low wages in return for their labor.

African Americans and Hispanic families are also less likely to be able to save for retirement, have little or no prospects of a substantial inheritance from parents or other relatives, and are more likely to have to share their meager earnings with family and friends who are even less well off.  As a result, “Plan for the Future” says, a majority of African American and Hispanic retirees rely on Social Security for over 90 percent of their income, as do more than 4 in 10 Asian and American Indian workers.

Average Percentage of Family Income from Social Security, 2004

The report goes on to outline a package of program changes to help those at the bottom of the labor market while also closing some of the benefit-revenue gap.  While you might not agree with the specific recommendations, the case for preserving and enhancing benefits for those most in need is compelling.

Yes, Social Security does need some adjustments to keep it on track, but the trust fund is not yet empty, so we have a little time to think carefully about how to do that without hurting those who cannot provide adequately for themselves and their families when faced with retirement, disability, or death.