In this report, we measure the potential impact of adding a new minimum benefit to Social Security, an enhancement included in many leading Social Security plans. We find that a minimum benefit would have only limited impact if it were restricted to retirees with long employment histories who did not retire early and if it failed to protect access to social welfare programs.

WHY THIS MATTERS

More than a quarter of people collecting Social Security retired worker benefits receive a benefit that falls below the federal poverty level (FPL). To lift more retirees out of poverty, many recent Social Security plans would add a new minimum benefit guaranteeing a benefit that equals or exceeds the FPL.

Several design features could limit the effectiveness of a new minimum benefit, however. Most of these proposals would restrict the full minimum benefit to retirees with relatively long work histories, even though many retirees receiving limited Social Security benefits worked less than a full career. Retirees who begin collecting Social Security before the full retirement age would qualify for only a reduced minimum benefit. Moreover, boosting Social Security benefits could jeopardize low-earning retirees’ access to social welfare programs, such as Supplemental Security Income (SSI) and Medicare, which have strict income limits.

KEY TAKEAWAYS

The effectiveness of a new minimum benefit for Social Security that would guarantee an annual Social Security income equal to 100 percent of the FPL depends on who would qualify, how early retirees would be treated, and how the new minimum would interact with social welfare programs.

• If the minimum benefit applied only to beneficiaries with more than 25 years of covered employment who first collect benefits after they reach age 67, it would raise Social Security benefits for less than half (47 percent) of beneficiaries who in the absence of a minimum benefit would receive benefits that fall below 100 percent of FPL.
• Lowering the work history requirement to 10 years of covered employment would raise benefits for 57 percent of low-income beneficiaries, but it would exclude more than 4 in 10 needy beneficiaries.
• Among SSI recipients who would receive additional Social Security benefits from a minimum benefit, 17 percent would lose all of their SSI and 81 percent would lose Medicaid coverage unless the policy includes explicit protections for those benefits.

HOW WE DID IT

We use the Dynamic Simulation of Income Model 4 (DYNASIM4), the Urban Institute’s dynamic microsimulation model, to simulate how a new minimum benefit for Social Security would affect Social Security benefits, program costs, SSI, and eligibility for Medicaid. We model two options—one that would grant a minimum benefit equal to or greater than 100 percent of the FPL only to retirees with more than 25 years of covered employment, and an alternative that would offer the full minimum to retirees with as few as 10 years of covered employment. Under both options, however, beneficiaries who begin collecting before reaching age 67, the full retirement age, would qualify for a smaller minimum. We assume that the new minimum benefit would have first become available in 2023 and only new beneficiaries would qualify. We examine outcomes in 2033, 10 years after the assumed implementation date.