Relying on Social Security Alone for Retirement

Orange City Iowa Estate Planning

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About 40% of older Americans may be relying exclusively on Social Security for income, according to recent research.

Just under half of American seniors are said to be relying only on Social Security for income according to the finding of a study released last month. However, another expert quickly tried to cast doubt on the results.

The researchers’ disagreement is one sign of just how difficult it can be to gain consensus on the state of retirement today. This may have ramifications for the success of Congressional lawmakers’ efforts to address the issue.

The statistic that 40% of older Americans rely exclusively on Social Security for retirement income, according to recent research from the National Institute on Retirement Security, is hard to believe, says Andrew Biggs, resident scholar at the American Enterprise Institute.

CNBC’s recent article entitled “Some retirees get by on just Social Security. Experts disagree on how many” reports that a lot of the effort to reform Social Security is based on numbers. In light of the fact that the stakes for reform are so high, it’s no shock that researchers are also butting heads.

The National Institute on Retirement Security’s report specifically examined respondents or households ages 60 and up who work fewer than 30 hours per week or not at all. This research is derived from 2014 data from the Survey of Income and Program Participation and the Social Security Administration Supplement on Retirement, Pensions and Related Content.

However, Biggs is skeptical that many people really only have income from just Social Security. Their numbers, he contends, are actually much smaller, based on data from the Census Bureau. The share of people who only have Social Security is a lot smaller. It is closer to 12%, Biggs argues.

One of his primary complaints is that the National Institute on Retirement Security skews its data by including individuals who are age 60 and over. This can include individuals on disability benefits. It also potentially ignores individuals who are delaying retirement, he said.

Research from other sources, like that of the Census or the Social Security Administration, typically looks at individuals who are 65 and older. These results are one way in which data can paint an unrealistically negative picture for retirement savings, says Biggs.

Nonetheless, the National Institute on Retirement Security (NIRS) has confidence in its research.

The researchers explained that they didn’t use a Census Bureau study that was published in 2017 because there were concerns about the reliability of the data. NIRS wanted to look only at sources of retirement income. To accomplish that, they purposely excluded people who might yet be working full-time, and who would get much of their income from wages. It also includes individuals who might not yet have attained eligibility for Social Security retirement benefits, which typically began at age 62. The varying criteria resulted in different findings from other studies.

There’s growth of economic insecurity among older households. Their savings relative to income is much less over time, which leads to a foreseeable problem. In other words, there’s a growing number of people—no matter what the data set and the matter the methodology used—who are ill prepared for retirement.

Reference: CNBC (Feb. 10, 2020) “Some retirees get by on just Social Security. Experts disagree on how many”

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