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Four in 10 older Americans rely solely on Social Security income in retirement — something for which the program was not designed and in any case is not considered sufficient for a secure retirement, according to a National Institute on Retirement Security report, released Tuesday.
The report, written by Tyler Bond, NIRS manager of research, and Frank Porell, professor emeritus at the University of Massachusetts Boston, found that only 6.8% of Americans receive income from a combination of Social Security, a defined benefit pension and a defined contribution account.
Retirement income from these three sources, the report said, makes it far less likely that retirees will face poverty and economic hardship.
The report noted that Social Security benefits replace only about 40% of pre-retirement income, whereas most financial planners recommend at least a 70% income replacement rate for retirees, and others say this should be even higher given longer lifespans and rising health costs.
In fact, the NIRS analysis showed that if Social Security income had been 10% higher in 2013, some 500,000 fewer older households would have been in poverty.
“The findings of this research reveal that Social Security has a profound role to play in preventing elder poverty,” NIRS executive director Dan Doonan said in a statement. “Accordingly, protecting and expanding Social Security should be a top priority for policymakers interested in the financial of security of America’s middle class and to keep them from falling into poverty.”
Still, Doonan pointed out, Social Security alone cannot provide a secure retirement. “It is clear from the data that pensions serve an important function in keeping working families in the middle class in retirement, more so than DC accounts that disproportionately benefit higher income Americans.”
He said receiving income from all three sources was the best way to achieve retirement security. “But this just isn’t the case for most older Americans today, and we are on a treacherous path for the future with dwindling pensions and proposals to cut to Social Security.”
The NIRS study drew data from the first wave of the re-engineered 2014 Survey of Income and Program Participation and the 2014 Social Security Administration Supplement on Retirement, Pensions, and Related Content.