Social Security payments are the largest income source for retirees, according to a new analysis from Boston College.
Payments account for 30 percent of income for the average American aged 65 years or older, the analysis noted.
“The findings show that Social Security is a really important program for older Americans,” wrote Alicia H. Munnell, a senior retirement research advisor at Boston College. “It is doing its job.”
The lowest-income households rely on Social Security most, with payments making up a staggering 83 percent of their income.
The payments have a much smaller role for the recipients with the highest income - 12 percent.
The data reveals that the country’s Social Security system is a lifeline for hundreds of thousands of older Americans. And that lifeline is on tenuous footing, according to experts.
Social Security payments started in 1942. Workers and employers pay into the system through taxes, and then the system uses that money to make monthly benefit payments to retirees.
In 1960, there were five workers for every retiree, according to think-tank Bipartisan Policy Center. That ratio meant there was plenty of money flowing into the Social Security Administration’s coffers.
But today, that ratio has dropped to 2.9 workers for every one retiree, the center said. By the 2070s, that ratio will fall to 2.2-to-1.
The Social Security system has had to draw more and more cash from its reserves to make payments meaning one source - the Old-Age and Survivors Insurance fund - is projected to run out by 2032.
That means significant cuts in how much the Social Security Administration pays the nation’s retirees, Bipartisan Policy Center points out.
“Unless Congress acts, current and future beneficiaries alike will see their benefits cut by 22%,” it wrote in a June analysis.
Lawmakers have floated solutions for the pending crisis but none have materialized. One focus is on the current limit on who pays Social Security taxes. Workers stop paying the taxes for any income above $184,500, according to the Internal Revenue Service.
Independent Senator Bernie Sanders has proposed legislation that would raise that limit to $250,000, offering a new source of funding that would help buoy the system’s financial state.
Part of the senator’s legislation also includes a $200 monthly payment boost for most Social Security recipients - the increase has been dubbed the “Bernie bump.”
But like other proposals, Sanders’ legislation has yet to pass votes in the House and Senate. Until then, think tanks and Americans are growing restless as Social Security’s 2032 doomsday gets closer.
“The longer Congress waits to act, the harder the fix becomes, and the greater the burden on retirees and taxpayers,” the Bipartisan Policy Center wrote.
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