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Finances » Social Security

Why It's Important

Our current public retirement system, Social Security, allows and may even encourage older workers to quit working. Social Security reforms, however, have increased or added incentives to work longer. Congress expected individual savings and other resources to play a significant role. Today Social Security provides some income to nearly all older adults, and is the largest source of income for most. Social Security's future role could change due to the program's long-term financing challenge and subsequent reforms.

 

See Data By: Richmond MSA | Virginia | National

How Richmond Is Doing

According to the US Social Security Administration 2008:

  • 16.5% of the 8,517 SSI beneficiaries in Richmond are 65+.

(USSSA, SSI Recipients by State and County, 2008)

How Virginia Is Doing

According to 2008 data from the Social Security Administration, reported by the AARP:

  • Virginia has the 9th highest per capita income in the United States.
  • 63% of Social Security beneficiaries in Virginia are retirees.
  • 92% of 65+ Virginia residents receive Social Security.
  • 42% of the 65+ population would be living below the poverty line without Social Security.
  • Social Security is the only source of income for 1 in 4 Virginias over 65.

(AARP PPI, Social Security: 2008 Virginia Quick Facts, 2008)

 

According to the US Social Security Administration 2008:

  • Almost one-quarter of SSI recipients in Virginia are 65+.

    • (USSSA, SSI Recipients by State and County, 2008)

    How the U.S. Is Doing

    According to the National Partnership for Women and Families:
    Social Security provides 90 percent or more of the total income for:

    • 44 percent of non-married women 65 and older
    • 66 percent of non-married Hispanic women 65 and older
    • 74 percent of non-married African American women 65 and older
    • 35 percent of all non-married men 65 percent and older

    (NPWF SOCIAL, SECURITY, POVERTY AND OLD AGE, 2008)

     

    According to a 2007 Research Highlights in the Demography and Economics of Aging report from the Population Reference Bureau, even as life expectancy increases, most Americans continue to retire before age 65 and begin taking Social Security benefits at 62, when these benefits are first offered. The average age at retirement in the United States has decreased from 74 in 1920 to 62 in 2000. Americans now live long and often productive post-retirement lives. And yet, the combination of decreasing fertility and longer retirements is resulting in a dwindling workforce and a growing old-age dependency ratio (the retired population ages 65 and older divided by the working population ages 20 to 64). In the United States, this ratio was 0.19 in 2000 but is projected to climb to 0.36 by 2050 due in part to the imminent retirement of the large Baby Boomer generation. This means that public revenue from taxable wages under current law will not be sufficient to support promised Social Security and Medicare benefits; indeed, the insolvency of these programs is projected to occur sometime in the next 30 years. According to a 2004 Congressional Budget Office report, spending under current law for the Social Security program will increase from 4.4 percent of gross domestic product (GDP) now to more than 6 percent in 2030. At the same time, revenues for the program will remain the same, about 5 percent of GDP. Outlays are projected to exceed revenues in 2017 and the Social Security Trust Fund will be exhausted by 2040.

    (POPULATION REFERENCE BUREAU, DEMOGRAPHY AND
    ECONOMICS OF AGING, 2007)

     

    In an AARP Public Policy Institute report entitled, Population Aging, Entitlement Growth, and the Economy by John R. Gist, Social Security’s growth “bump” from 2010 to 2035 is due almost entirely to the retirement of the boomer cohort.
    Additional findings from this report are:

    • The official poverty rate among the population ages 65 and older was 10.3 percent in 2003, subtracting Social Security income leaves the poverty rate for this age group at 47.6 percent in 2016.
    • The share of elderly widows living alone rose from 18 percent in 1940 to 62 percent in 1990, while the share living with adult children declined from 59 percent to 20 percent.
    • Overall, about 54 percent of all entitlement dollars are received by the under age 65 population.
    • A more direct per capita comparison in a 1998 CBO report found that state and local governments spent about $4,000 on each child in 1995, compared with about $700 for each elderly person, whereas the federal government spent $14,000 for each elderly person and $2,000 per child.

    (AARP, PPI GIST, 2007)

     

    Table 1. How Retirement Age Affects the Total Assets
    Needed in Retirement
    (Married Couple at 50th Income Precentile)
    Retirement Age 80 Percent of Preretirement After-Tax Income Annual Social Security Payments (a) Additional Annual After- Tax Retirement Income (Besides SS) Needed to Achieve 80 Percent of Preretirement Income Assets Needed at Retirement to Produce That Additional Income Through an Annuity
    (b)    		 Personal Assets Needed at Age 62 to Produce That Additional Income at Retirement Age
    (c)
    50th Income Percentile
    62 $46,848 $20,088 $26,760 $510,757 $510,757
    66 46,848 27,648 19,200 298,380 243,340
    70 46,848 38,136 8,712 117,651 51,768
    1. Source: Congressional Budget Office, Retirement Age and the Need for Saving, Washington, DC: U.S. Government Printing Office, May 12, 2004
      Based on SSA’s Social Security Quick Calculator accessed at
    2. http://www.ssa.gov/OACT/quickcalc/index.html
      Based on federal Thrift Savings Plan annuity cost, accessed at http://calc.tsp.gov/annuityCalculators/annuity.cfm
    3. Assuming a 10 percent saving rate between age 62 and retirement age.

     

    By 2030, when most boomers will have retired, Social Security costs will be growing mainly because of the boomers’ longevity.

    (AARP, PPI GIST, 2007)

    Data & Information Sources

    AARP Public Policy Institute, Population Aging, Entitlement Growth, and the Economy by John R. Gist, 2007

    http://assets.aarp.org/rgcenter/econ/2007_01_security.pdf

    AARP Public Policy Institute, Social Security: 2008 Virginia Quick Facts, 2008
    http://assets.aarp.org/rgcenter/econ/ss_facts_08_va.pdf

    Federal Interagency Forum on Aging Related Statistics

    http://www.agingstats.gov/agingstatsdotnet/main_site/default.aspx

    National Partnership for Women & Families, Social Security, Poverty & Old Age

    http://www.nationalpartnership.org/site/DocServer/SocialSecurityPovertyOldAge.pdf?docID=1089

    Population Reference Bureau, Research Highlights in the Demography and Economics of Aging, 2007

    http://www.agingsociety.org/agingsociety/publications/public_policy/fiscalimpact.pdf

    Social Security Administration

    http://www.ssa.gov/

    U.S. Census Bureau, American Community Survey

    http://www.census.gov/acs/www/

    U.S. Social Security Administration, Office of Retirement and Disability Policy, OASDI Beneficiaries by State and County, 2007 http://www.ssa.gov/policy/docs/statcomps/oasdi_sc/2007/va.html

    U.S. Social Security Administration, Office of Retirement and Disability Policy, SSI Recipients by State and County, 2008 http://www.ssa.gov/policy/docs/statcomps/ssi_sc/2008/va.html