The push to save Social Security

Social Security’s money problems hang heavily over the future of retirees, leaving many politicians and industry watchdogs to worry if the nation will see a growing number of old, poor people without the resources to pay for even the basics of life.

Statistics paint a picture of millions of senior citizens forced to live in poverty after their working years end. But congressional gridlock prevents any action that would allow Social Security benefits to remain at promised levels despite evidence of broad public support for changes.

“I fear that if we look at this 30 years down the road, it will look very different. So much of the work we’ve done over the last century with Social Security and Medicare will be undone,” said Diane Oakley, executive director of the National Institute on Retirement Security, a nonprofit research and education organization based in Washington, D.C.

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What happens before those decades pass will go a long way in determining how well current workers fare during retirement. Current projections show that the Social Security fund’s surplus will run out in 2033. After that, benefits will be reduced to 75 percent of promised levels.

Official poverty estimates for the elderly in the U.S. range from 9 percent to 14 percent, depending on the measure used. The Census Bureau uses two methods to measure poverty. The first, which settles on the lower figure, sets the poverty line at three times a subsistence food budget. Since it was developed in the 1960s it has been updated only for inflation.

The second method takes into account other necessary expenditures including out-of-pocket health-care costs, which are usually higher for the elderly.

Other measures are bleaker. The Organisation for Economic Co-operation looked at retirement benefits among 34 countries. It pegged the U.S. poverty rate for the elderly at just below 20 percent. The OECD defines poverty as earnings of 50 percent of median income for households of a similar size. This method is used as a way to measure the ability to afford the standard elements of a lifestyle in a given society.

Staying above the poverty line is becoming a more difficult proposition as companies have shifted from traditional pension plans with defined benefits to savings plans marked by defined contributions.

“Individuals with a defined benefit income are nine times less likely to be at or near poverty, “Oakley said.

Oakley said the change in employer-sponsored retirement plans makes Social Security that much more important to retirees’ financial security.

“Everyone says Social Security was never intended as total income (for retirement),” she said. “But workplace pensions only cover about half of all workers and 92 percent don’t have enough savings.”

Before Social Security was implemented, more than half of all U.S. seniors were living in poverty. Those who had no family to take care of them were left to their own devices or, as Oakley, said, “would end up at the poor farm.”

Today, the system keeps 35 percent of all senior citizens out of poverty, according to AARP’s Public Policy Institute. That translates to help for 14 million people.