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Social Security Constitutes Most of Retirement Income for Most Americans

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Social Security, which turned 83 this week, provides about half of family income for about half of Americans older than 65. For many, it is the vast majority of that income.

“The percentage of families in which Social Security benefits account for at least half of their retirement income rises to 70% for blacks and Hispanics,” Alan Barber, a policy analyst at the Center for Economic and Policy Research, wrote in a blog published this week.

“Benefits are roughly 90% of income for one in four of those 65 or older.”

(Related: 12 Best States for Retirement: 2018)

Social Security has been successful in terms of administrative costs and by keeping millions of people out of poverty, Barber noted. “The program is particularly important to people who have earned the least over the years and have fewer alternative sources of income.”

In particular, people of color, women and folks at the lower ends of the income distribution rely on Social Security more than other groups.

Barber and his co-author David Rosnick, a CEPR economist, used data from the 2015 March CPS to determine the share of Social Security income for groups 65 and older by race, marital status and gender.

They found that in aggregate, Social Security benefits were the largest share of income for the least advantaged recipients, those in the first and second quintiles: 80.8% and 79.4%, respectively.

For the third quintile, Social Security was 59.9% of income, while for the fourth and fifth quintiles, benefits represented a much small proportion of income, 38.4% and 15.1%.

Barber and Rosnick’s calculations showed that overall and among married couples, Social Security was 28.1% of total income. For the first and second quintiles, however, Social Security made up well over 50% of retirement income for all groups, other than Asians in the first quintile (45.8%).

Most married couples in the third quintile relied on Social Security benefits for between 41.9% and 49% of their income, but the share shot up to 63% for Hispanic couples.

Among single men in the first quintile, Social Security accounted for nearly all of retirement income for those in the “Other, Non-Hispanic” category: 92.6%.

For all other men in the first and second quintiles, benefits ranged between 72% and 85% of income.

The authors found that the variation among quintiles was not as substantial for single women. However, Social Security benefits were a significantly larger share of income at the third, fourth and fifth quintiles for women than for men and married couples.

Even so, the average Social Security benefit for women was $14,270 a year, compared with $18,375 a year for men.

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