Current Sources of Retirement Income A surprising number of the elderly rely heavily on Social Security. Nearly two-thirds of aged Social Security beneficiaries receive half or more of their total money income from Social Security, and 30 percent receive more than 90 percent of their income from this single source (fig. 3).
K
nowledge of the relative importance of our nation’s major systems for providing income to current retirees is important to understanding the impact of demographic and economic trends on retirement income security in the future and the ramifications of options for changing the current systems. Non-poor individuals and couples 65 and older rely on four basic income sources—Social Security, employer-sponsored pensions, income from their savings, and earnings. Of these, Social Security is most widespread. Over 90 percent of the over-65 population receives Social Security benefits.1 The second most common source of income is assets, followed by employer pensions, and earnings (fig. 1).
Figure 3 Reliance on Social Security by the Aged, 1994 36%
Beneficiaries
34%
Figure 1 Sources of Income for Americans Over 65, 1994
16% 14%
91%
Receiving Income
67% Less than 50%
50% to 89%
90% to 99%
100%
Percent of Income from Social Security 42%
Source: Income of the Aged Chartbook, 1994, Social Security Administration, Office of Research and Statistics, June 1996 (rev.), p. 9.
Heavy reliance on Social Security is not restricted to the least well off among the elderly. Six out of ten in the middle 20 percent of the income distribution rely on Social Security for 60 percent or more of their income, and 23 percent rely on Social Security for 90 percent or more of their income. Even among the upper-middle-income elderly, 32 percent rely on Social Security for more than 60 percent of their income (fig. 4).
21%
Social Security
Asset Income
Pensions
Earnings
Source: Income of the Population 55 or Older, 1994, Susan Grad, Social Security Administration, Office of Research and Statistics, January 1996, Table I. 1, p. 1.
Figure 4
Social Security also makes up the largest share of the aged population’s total income. Social Security accounts for 42 percent— twice the amount of any other source. Although the percentage of those who receive income from assets, pensions, and earnings varies substantially, overall each source accounts for about 20 percent of the income for aged individuals and couples (fig. 2).
Reliance on Social Security According to Income Group, 1994 Receive 60% or More From Social Security
83%
78%
Receive 90% or More From Social Security
62%
60%
Figure 2 Reliance
51%
Amount of Income of the Aged from Major Sources, 1994
Social Security 42%
32% 23%
Asset Income 18%
4% Lower
Lower Middle
Middle
Upper Middle
4%
1%
Upper
Income Group (by quintiles) Source: Income of the Population 55 or Older, 1994, Susan Grad, Social Security Administration, Office of Research and Statistics, January 1996, Table VI.A. 2, p. 91.
Earnings 18% Other 3%
Despite this heavy reliance on Social Security, income from other sources is also of paramount importance. This is especially true for the higher-income aged, for whom Social Security replaces the lowest percentage of preretirement earn-
Pensions 19% Source: Income of the Aged Chartbook, 1994, Social Security Administration, Office of Research and Statistic, June 1996 (rev.), p. 15.
4