Social Security Plays Bigger Role for Lower-Income Households
The concept of Social Security was signed into law 90 years ago today. A new analysis from the Transamerica Center for Retirement Studies analyzes how the benefit impacts Americans today, and how future insolvency could threaten their economic stability.
Over half of retirees surveyed (53%) expect Social Security to be their primary source of income throughout retirement, while only 24% of non-retirees anticipate the same, including 23% of workers, 59% of unemployed individuals, and 37% of homemakers.
This is especially true for low-to-moderate income households, who tend to be more reliant on Social Security compared to other groups. According to the research, over 52% of people with a household income of less than $50,000 expect Social Security to be their primary source of retirement income compared with 34% of those with a household income of $50,000 to $99,000, 21% with $100,000 to $199,000, and 13% of those with over $200,000 in household income.
Reliance on Social Security was even more important for retirees with a household income of under $100,000. More than eight in 10 retirees with a household income of less than $50,000 (85%) and more than half of retirees with a househoId income of $50,000 to $99,000 (54%) ranked Social Security as their primary source of retirement income, reported Transamerica.
“Social Security is a meaningful source of retirement income for Americans across the wealth spectrum, and it is a lifeline for retirees with limited means,” said Catherine Collinson, CEO and president of Transamerica Institute and TCRS.
The findings come as more workers grapple with the idea of having limited savings in retirement. Seventy percent of people surveyed agree with the statement, “I feel that I could work until retirement and still not save enough to meet my needs,” while 42% of retirees indicate that they were unable to save enough to meet their retirement needs. Three in four people (76%) say they could work until retirement and still not meet their savings goals, or, if retired, indicate they were unable to save enough.
Those who are not yet retired have saved $51,000 in total household retirement accounts, including people in the workforce ($65,000), homemakers ($16,000), and unemployed individuals who are not looking for work, at zero dollars saved.
Women were also found to have a greater reliance on Social Security, with 59% who classify it as their primary source of income, compared to 47% of men.
“Women face societal headwinds that make it even more challenging to achieve a financially secure retirement. The persistence of the gender pay gap combined with taking time out of the workforce for parenting and caregiving puts many women at risk of inadequately saving for retirement. As a result, women have greater reliance than men on Social Security for retirement income,” said Collinson.
Addressing insolvency
As experts warn of accelerations to the insolvency date following passage of President Donald Trump’s One Big Beautiful Bill Act (OBBBA), Transamerica asked its respondents how they want Congress to act against the impending funding shortfall.
People’s responses for specific reforms include increasing the maximum earnings subject to payroll taxes (38%), increasing the Social Security payroll tax rate (35%), preserving retirement benefit payments for retirees in greatest need (28%), and raising the retirement age (22%). One in four people (25%) say they “don’t know,” and just 5% believe Congress should “do nothing.”
“Social Security has served as the cornerstone of retirement income since its establishment nine decades ago. It provides millions of older Americans with guaranteed income, so that they can retire with greater financial security,” said Collinson. “With the estimated depletion of the Social Security trust funds looming large, now is the time for policymakers to identify reforms that can help ensure the program’s sustainability for the next 90 years.”
SEE ALSO:
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
