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Social Security Lifts More Americans Above Poverty Than Any Other Program

UPDATED
July 19, 2019

Social Security benefits play a vital role in reducing poverty in every state, and they lift more Americans above the poverty line than any other program. Without Social Security, 22.1 million more Americans would be poor, according to analysis using the March 2018 Current Population Survey. Although most of those whom Social Security keeps out of poverty are elderly, 6.7 million are under age 65, including 1.1 million children. (See Table 1.) Social Security is particularly important for elderly women and people of color, who have fewer retirement resources outside of Social Security. Depending on their design, reductions in Social Security benefits could significantly increase poverty, particularly among the elderly.

Effect of Social Security on Poverty (Official Poverty Measure), 2017
  Percent in Poverty  
Age Group Excluding Social Security Including Social Security Number Lifted Above the Poverty Line by Social Security
Children Under 18 19.0% 17.5% 1,106,000
Adults Ages 18-64 14.1% 11.2% 5,629,000
Elderly Age 65 and Over 39.2% 9.2% 15,333,000
Total, All Ages 19.1% 12.3% 22,068,000

Source: CBPP, based on data from the Census Bureau Current Population Survey, March 2018

 

Social Security Lifts 15 Million Elderly Americans Out of Poverty

Without Social Security, 39.2 percent of elderly Americans would have incomes below the official poverty line.Most people aged 65 and older receive the majority of their income from Social Security.[1] Without Social Security benefits, 39.2 percent of elderly Americans would have incomes below the official poverty line, all else being equal; with Social Security benefits, only 9.2 percent do. (See Figure 1.) These benefits lift 15.3 million elderly Americans above the poverty line, these estimates show.

A recent study that matches Census survey data to administrative records suggests that the official estimates overstate elderly reliance on Social Security but confirmed that Social Security lifts millions of elderly Americans out of poverty and dramatically reduces the elderly poverty rate. (See Appendix below for more information.)

Social Security Lifts More Than 1 Million Children Out of Poverty

Figure 1
Social Security Dramatically Cuts Poverty Among Seniors

Social Security is important for children and their families as well as for the elderly. About 6.1 million children under age 18 (8 percent of all U.S. children) lived in families that received income from Social Security in 2017, according to Census data. This figure includes children who received their own benefits as dependents of retired, disabled, or deceased workers, as well as those who lived with parents or relatives who received Social Security. In all, Social Security lifts 1.1 million children out of poverty.

Social Security records show that 2.9 million children under age 18 qualified for Social Security payments themselves in December 2017. (See Appendix Table 2.) Of these, 1.2 million were the survivor of a deceased worker. Another 1.4 million received payments because their parent had a severe disability. And 337,000 children under 18 received payments because their parent or guardian was retired.[2]

Social Security Protects Groups That Are Particularly Vulnerable to Poverty

Social Security is especially important for women and people of color. Women tend to earn less than men, take more time out of the paid workforce, live longer, accumulate less savings, and receive smaller pensions. Social Security brings 9.1 million elderly women out of poverty, as Table 2 shows.

African American and Latino workers benefit substantially from Social Security because they have higher disability rates and lower lifetime earnings than white workers, on average. In addition, African American workers have higher rates of premature death than white workers, and so are more likely to be eligible for Social Security survivor benefits. Latino workers have longer average life expectancies than white workers, which means they have more years to collect retirement benefits. Without Social Security, the poverty rate among elderly Latinos would approach 50 percent, and the poverty rate among elderly African Americans would exceed 50 percent.

TABLE 2
Effect of Social Security on Elderly Poverty by Sex and Race, 2017
  Percent in Poverty  
Demographic Group Excluding Social Security Including Social Security Number Lifted Out of Poverty by Social Security
Sex      
Men 34.7% 7.5% 6,272,000
Women 42.9% 10.5% 9,062,000
Race/Ethnicity      
White 37.4% 7.0% 11,899,000
African American 51.7% 19.0% 1,506,000
Latino 46.1% 17.0% 1,257,000
Other 33.2% 11.1% 670,000
Total, Age 65+ 39.2% 9.2% 15,333,000

Source: CBPP, based on data from the Census Bureau Current Population Survey, March 2018

 

Social Security Reduces Poverty in Every State

Social Security reduces elderly poverty dramatically in every state in the nation, as Figure 2 and Appendix Table 1 show. Without Social Security, the poverty rate for those aged 65 and over would meet or exceed 40 percent in more than half the states; with Social Security, it is less than 10 percent in two-thirds of states. Social Security lifts more than 1 million elderly people out of poverty in California, Florida, and Texas, and over half a million in Illinois, New York, North Carolina, Ohio, and Pennsylvania.

Figure 2
Social Security Reduces Number of Elderly Poor in Every State

Social Security’s Effect on Poverty Using the Supplemental Poverty Measure

Unlike the official poverty measure, the Census Bureau’s Supplemental Poverty Measure (SPM) counts government non-cash benefits (like food or rental assistance) and tax-based benefits (such as the Earned Income Tax Credit) as income. Comparing across all programs, Social Security is the most important anti-poverty program, according to the Census Bureau.  

The SPM also subtracts from a household’s income various taxes, work expenses, and out-of-pocket medical spending. The elderly poverty rate is 50 percent higher using the SPM, compared to the official measure, mostly because the elderly spend significantly more of their incomes on health care than working-age adults or children, and the SPM takes health care spending into account. The elderly poverty rate without Social Security would reach nearly 50 percent.

TABLE 3
Effect of Social Security on Poverty (Supplemental Poverty Measure), 2017
  Percent in Poverty  
Age Group Excluding Social Security Including Social Security Number Lifted Above the Poverty Line by Social Security
Children Under 18 17.5% 15.6% 1,442,000
Adults Ages 18-64 17.3% 13.3% 7,931,000
Elderly Age 65 and Over 48.7% 14.1% 17,653,000
Total, All Ages 22.3% 13.9% 27,027,000

Source: U.S. Census Bureau, The Supplemental Poverty Measure: 2017, Tables A-6 and A-7. https://www.census.gov/content/dam/Census/library/publications/2018/demo/p60-265.pdf

Technical Note

This analysis uses the Census Bureau’s official definition of poverty (except for the box that shows the Supplemental Poverty Measure). In determining poverty status, the Census Bureau compares a family’s cash income before taxes with poverty thresholds that vary by the size and age of the family. The poverty thresholds in 2017 were $11,756 for an elderly individual, $14,828 for an elderly couple, and $25,094 for an average family of four.[3] To calculate the anti-poverty effects of Social Security, we determined each family’s poverty status twice — first excluding and then including the family’s Social Security benefits.

Our analysis considers the non-institutionalized population using data from the Census Bureau’s Current Population Survey (CPS), the survey that is used to produce official poverty estimates.[4] Each March the CPS collects information on personal income, health coverage, and other social and economic characteristics for the previous year. The national estimates reported here are for 2017. The state-by-state estimates are based on a three-year average (for 2015-2017) to improve their reliability.

This analysis does not take into account other changes that would occur in the absence of Social Security. If Social Security did not exist, many elderly individuals likely would have saved somewhat more and worked somewhat longer, and many might live with their adult children rather than in their own households. Other studies confirm, however, that Social Security has made a very large contribution to reducing poverty and that cutting Social Security benefits could substantially increase poverty among the elderly.[5]

Appendix

A 2017 study by Adam Bee and Joshua Mitchell of the Census Bureau matched the CPS survey responses used for official poverty statistics to administrative data from the Social Security Administration, Internal Revenue Service, and other government sources.[6] They found that official estimates overstate elderly reliance on Social Security and elderly poverty rates, but confirmed that Social Security lifts millions of elderly Americans out of poverty and dramatically reduces the elderly poverty rate. They did not find significant underreporting of income among people of working age.

Bee and Mitchell found that survey respondents generally reported accurately whether they received Social Security or earnings, but not whether they received pension income. Roughly half of elderly respondents who received pension income (either income from traditional defined-benefit pensions or withdrawals from defined-contribution pensions like 401(k)s or individual retirement accounts) failed to report this, particularly respondents whose pension income was small or inconsistent. On the other hand, respondents who reported receiving Social Security, earnings, or pension income generally reported accurately the amount they received from those sources.

Appendix Figure 1

Most Elderly Households Have Incomes Below $50,000

Most retirees have modest incomes, save for some at the top of the income spectrum. Bee and Mitchell show that most low-income elderly households have very little pension income, if any; the majority of elderly households in the bottom third of the income distribution receive no pension income at all (compared to more than 80 percent of those in the top two-thirds). The study shows elderly households had a median income of about $44,000 in 2012 (compared to about $34,000 using the CPS alone, about a 30 percent difference). Further, about 1 in 4 retiree households live on less than $20,000, and the substantial majority live on $50,000 or less (see Appendix Figure 1). Meanwhile, the wealthiest tenth of senior households had incomes of $230,000, on average, Bee and Mitchell report.

Bee and Mitchell’s study confirms Social Security’s large effect on elderly poverty, but the enhanced data reduce both the elderly poverty rate and the number of elderly lifted from poverty, compared to the official measures. The study estimates an elderly poverty rate in 2012 of nearly 7 percent, rather than the official rate of 9 percent. It also estimates that Social Security lifted about 3 in 10 elderly Americans — 10 million — out of poverty, about one-third lower than official estimates.

Bee and Mitchell’s study confirms that Social Security remains the foundation of retirement income. Social Security is the largest single source of income for older Americans, providing the majority of income for half of retirees, and at least 90 percent of income for 18 percent of retirees. These rates of reliance are similar to Health and Retirement Survey and Survey of Income and Program Participation estimates.[7] However, they indicate significantly less reliance on Social Security than the CPS alone, which estimated that about 65 percent of seniors received at least half their income from Social Security, and that 36 percent received at least 90 percent. The study also finds that Supplemental Security Income (SSI) plays a more important role in elderly income than official figures suggest, as many low-income seniors confuse SSI with Social Security.

Bee and Mitchell’s data extend only through 2012, and their findings cannot be easily extrapolated to later cohorts of the elderly. Trends strongly indicate that the composition and distribution of retirement income will change significantly. Somewhat surprisingly, Bee and Mitchell found that roughly two-thirds of non-Social Security retirement income was from traditional defined-benefit pensions, which have largely been replaced by defined-contribution plans in the private sector for today’s workers. Future retirees will be much less likely to have these pension benefits, and more of their retirement income will come from defined-contribution plans and individual retirement accounts, in which balances are highly unequal.

APPENDIX TABLE 1
Effect of Social Security on Poverty Among the Elderly by State, 2015-2017
  Percent in Poverty Number Lifted Out of Poverty by Social Security
  Excluding Social Security Including Social Security
Alabama 48.3% 10.8% 278,000
Alaska 27.5% 7.4% 17,000
Arizona 36.7% 10.1% 299,000
Arkansas 49.9% 9.7% 190,000
California 35.3% 10.7% 1,318,000
Colorado 33.7% 6.5% 209,000
Connecticut 28.9% 5.3% 138,000
Delaware 37.7% 8.2% 47,000
Dist. of Columbia 34.4% 15.5% 17,000
Florida 45.2% 9.6% 1,411,000
Georgia 46.4% 11.8% 447,000
Hawaii 31.4% 8.0% 55,000
Idaho 45.6% 6.8% 99,000
Illinois 36.0% 8.0% 536,000
Indiana 41.6% 9.5% 320,000
Iowa 35.0% 6.6% 139,000
Kansas 44.9% 9.7% 155,000
Kentucky 49.8% 13.3% 269,000
Louisiana 49.2% 15.2% 217,000
Maine 43.9% 6.5% 98,000
Maryland 33.0% 7.5% 223,000
Massachusetts 35.7% 7.8% 284,000
Michigan 36.5% 6.9% 492,000
Minnesota 35.5% 6.8% 254,000
Mississippi 55.6% 12.7% 189,000
Missouri 41.4% 8.7% 321,000
Montana 42.1% 6.7% 69,000
Nebraska 40.4% 6.5% 99,000
Nevada 38.7% 9.4% 135,000
New Hampshire 33.8% 6.8% 60,000
New Jersey 37.2% 8.5% 402,000
New Mexico 45.1% 11.4% 111,000
New York 37.5% 10.9% 855,000
North Carolina 45.0% 8.6% 555,000
North Dakota 38.9% 9.4% 31,000
Ohio 39.5% 8.0% 569,000
Oklahoma 45.6% 9.4% 211,000
Oregon 34.6% 5.4% 201,000
Pennsylvania 39.4% 7.8% 707,000
Puerto Rico* 69.4% 39.4% 194,000
Rhode Island 36.3% 7.8% 47,000
South Carolina 43.9% 7.5% 306,000
South Dakota 41.1% 10.2% 44,000
Tennessee 45.8% 8.7% 405,000
Texas 43.5% 10.5% 1,131,000
Utah 33.1% 6.3% 92,000
Vermont 41.2% 6.6% 38,000
Virginia 38.9% 8.8% 353,000
Washington 34.5% 6.3% 317,000
West Virginia 49.7% 9.0% 138,000
Wisconsin 38.5% 5.9% 301,000
Wyoming 38.4% 9.1% 25,000
Total, Persons Age 65+ 40.0% 9.1% 15,225,000

Notes: Income is family cash income. The poverty rate “including Social Security” is the official poverty rate. Source: CBPP analysis of Census Bureau data from the 2016-2018 March Current Population Survey (CPS) and from the 2016-2017 Puerto Rico Community Survey.

* Totals do not include Social Security beneficiaries who live in Puerto Rico, the other territories, or abroad because the CPS does not collect data for them. Estimates for Puerto Rico are based on the Puerto Rico Community Survey.

APPENDIX TABLE 2
Social Security Beneficiaries by State or Other Area and Age, 2018
  Total Age 65 and Older Age 18-64 Children Under Age 18
Alabama 1,143,125 762,451 311,089 69,585
Alaska 101,402 74,537 19,941 6,924
American Samoa 6,140 2,707 2,036 1,397
Arizona 1,349,458 1,049,491 242,347 57,620
Arkansas 696,936 468,661 185,246 43,029
California 5,962,804 4,682,586 1,049,789 230,429
Colorado 874,819 687,325 151,838 35,656
Connecticut 681,765 538,190 118,022 25,553
Delaware 213,246 163,644 41,140 8,462
Dist. of Columbia 83,059 60,973 18,358 3,728
Florida 4,626,156 3,588,191 853,634 184,331
Georgia 1,830,266 1,299,615 426,570 104,081
Guam 18,228 12,536 3,602 2,090
Hawaii 271,236 222,584 38,194 10,458
Idaho 346,243 261,270 68,941 16,032
Illinois 2,243,286 1,713,948 436,730 92,608
Indiana 1,350,417 981,752 301,668 66,997
Iowa 647,462 504,073 119,917 23,472
Kansas 552,973 419,144 108,237 25,592
Kentucky 989,575 658,874 272,729 57,972
Louisiana 907,733 620,043 230,042 57,648
Maine 344,482 251,573 78,074 14,835
Maryland 1,001,230 770,494 185,348 45,388
Massachusetts 1,273,360 960,157 256,671 56,532
Michigan 2,209,084 1,592,758 514,310 102,016
Minnesota 1,032,697 809,205 185,398 38,094
Mississippi 668,877 441,394 182,780 44,703
Missouri 1,293,897 929,485 300,961 63,451
Montana 233,801 180,677 43,588 9,536
Nebraska 345,725 271,002 60,580 14,143
Nevada 536,855 410,535 102,259 24,061
New Hampshire 305,855 226,999 63,857 14,999
New Jersey 1,625,600 1,272,904 286,859 65,837
New Mexico 436,551 318,723 94,689 23,139
New York 3,627,340 2,756,182 721,788 149,370
North Carolina 2,098,741 1,532,383 469,941 96,417
North Dakota 133,773 105,788 22,722 5,263
N. Mariana Islands 3,038 1,761 795 482
Ohio 2,356,367 1,740,512 510,888 104,967
Oklahoma 789,288 563,777 181,302 44,209
Oregon 871,988 679,533 163,425 29,030
Pennsylvania 2,825,178 2,128,654 580,828 115,696
Puerto Rico 821,128 560,552 221,136 39,440
Rhode Island 225,493 166,444 49,026 10,023
South Carolina 1,143,297 829,060 258,925 55,312
South Dakota 178,999 141,884 30,109 7,006
Tennessee 1,452,552 1,024,517 350,102 77,933
Texas 4,224,159 3,129,831 861,291 233,037
U.S. Virgin Islands 21,728 17,384 3,236 1,108
Utah 406,568 309,952 72,830 23,786
Vermont 150,319 113,321 30,936 6,062
Virginia 1,530,417 1,153,798 308,457 68,162
Washington 1,346,820 1,042,649 253,959 50,212
West Virginia 475,744 326,489 124,313 24,942
Wisconsin 1,233,379 934,831 251,180 47,368
Wyoming 112,386 86,041 21,577 4,768
Total 62,906,222 47,159,080 12,888,821 2,858,321

Source: Social Security Administration, Annual Statistical Supplement, 2019, Table 5.J5. Totals include residents of territories and Americans abroad.

End Notes

[1]Policy Basics: Top Ten Facts About Social Security, Center on Budget and Policy Priorities, August 12, 2018, http://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security.

[2] Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 2018, Table 5.F4.

[3] Poverty thresholds depend on the size of the family and the ages of its members; this $25,094 figure is a weighted average for families of four. For more information, see https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html.

[4] U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2017, September 12, 2018, https://www.census.gov/newsroom/press-releases/2018/income-poverty.html.

[5] Eugene Smolensky, Sheldon Danziger, and Peter Gottschalk, “The Declining Significance of Age in the United States: Trends in the Well-Being of Children and the Elderly Since 1939,” in John L. Palmer, Timothy Smeeding, and Barbara Boyle Torrey, eds., The Vulnerable, Urban Institute, 1988; Gary V. Engelhardt and Jonathan Gruber, Social Security and the Evolution of Elderly Poverty, National Bureau of Economic Research Working Paper 10466, May 2004.

[6] Adam Bee and Joshua Mitchell, “Do Older Americans Have More Income Than We Think?,” U.S. Census Bureau, SESHD Working Paper #2017-39, July 2017, https://www.census.gov/content/dam/Census/library/working-papers/2017/demo/SEHSD-WP2017-39.pdf.

[7] Irina Dushi, Howard M. Iams, and Brad Trenkamp, “The Importance of Social Security Benefits to the Income of the Aged Population,” Social Security Bulletin, 2017, https://www.ssa.gov/policy/docs/ssb/v77n2/v77n2p1.html.