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Social Security Lifts More Americans Above Poverty Than Any Other Program

UPDATED
November 5, 2018

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.

TABLE 1
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  
  Excluding Social Security Including Social Security Number Lifted Out of Poverty by 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
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. We do not include Social Security beneficiaries who live in the territories or abroad in our analysis because the CPS does not collect the relevant data for them.

Source: Center on Budget and Policy Priorities, based on data from the Census Bureau Current Population Survey, March 2016, 2017, and 2018.

APPENDIX TABLE 2
Social Security Beneficiaries by State and Age, 2017
  Total Age 65 and Older Age 18-64 Children Under Age 18
Alabama 1,131,359 742,015 317,027 72,317
Alaska 98,359 70,946 20,237 7,176
Arizona 1,310,666 1,006,004 246,093 58,569
Arkansas 692,178 457,969 189,549 44,660
California 5,858,780 4,540,709 1,080,359 237,712
Colorado 852,635 660,075 155,881 36,679
Connecticut 673,359 527,414 119,780 26,165
Delaware 206,939 157,067 41,348 8,524
Dist. of Columbia 82,253 59,621 18,887 3,745
Florida 4,531,636 3,478,703 865,529 187,404
Georgia 1,790,398 1,253,470 431,136 105,792
Hawaii 266,523 216,357 39,523 10,643
Idaho 335,551 249,368 69,922 16,261
Illinois 2,220,171 1,676,979 447,336 95,856
Indiana 1,335,288 956,813 309,502 68,973
Iowa 638,322 492,194 122,182 23,946
Kansas 544,486 407,613 110,512 26,361
Kentucky 980,991 642,647 278,278 60,066
Louisiana 895,826 602,652 233,808 59,366
Maine 338,770 243,765 79,680 15,325
Maryland 983,736 748,975 188,657 46,104
Massachusetts 1,260,786 937,926 264,108 58,752
Michigan 2,186,709 1,553,896 526,657 106,156
Minnesota 1,012,620 784,547 189,283 38,790
Mississippi 661,656 429,364 186,235 46,057
Missouri 1,281,534 908,800 307,262 65,472
Montana 228,685 174,233 44,774 9,678
Nebraska 340,251 264,346 61,550 14,355
Nevada 521,297 393,957 103,214 24,126
New Hampshire 300,267 219,362 65,358 15,547
New Jersey 1,613,096 1,249,367 295,411 68,318
New Mexico 427,426 307,512 96,235 23,679
New York 3,586,883 2,695,543 735,970 155,370
North Carolina 2,059,436 1,481,565 479,092 98,779
North Dakota 130,831 102,812 22,819 5,200
Ohio 2,337,114 1,705,244 523,726 108,144
Oklahoma 778,970 550,072 183,986 44,912
Oregon 853,498 655,226 168,332 29,940
Pennsylvania 2,795,950 2,083,821 592,887 119,242
Rhode Island 222,851 162,468 50,061 10,322
South Carolina 1,115,313 797,317 261,894 56,102
South Dakota 175,389 137,556 30,644 7,189
Tennessee 1,431,690 994,961 357,258 79,471
Texas 4,126,055 3,013,278 875,515 237,262
Utah 395,718 297,152 74,541 24,025
Vermont 147,683 109,868 31,532 6,283
Virginia 1,501,543 1,117,980 313,783 69,780
Washington 1,319,176 1,005,651 261,711 51,814
West Virginia 473,398 320,384 127,547 25,467
Wisconsin 1,212,439 907,428 256,304 48,707
Wyoming 109,624 82,976 21,696 4,952
Total 61,903,360 45,808,776 13,156,718 2,937,866

Source: Social Security Administration, Annual Statistical Supplement, 2018, Table 5.J5. Includes residents of territories and Americans abroad (not shown).

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.