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, 21.7 million more Americans would be poor, according to analysis using the March 2019 Current Population Survey. Although most of those whom Social Security keeps out of poverty are elderly, 6.9 million are under age 65, including 1.2 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), 2018 Percent in Poverty Age Group Excluding Social Security Including Social Security Number Lifted Above the Poverty Line by Social Security Children Under 18 17.8% 16.2% 1,197,000 Adults Ages 18-64 13.5% 10.7% 5,653,000 Elderly Age 65 and Over 37.8% 9.7% 14,810,000 Total, All Ages 18.5% 11.8% 21,661,000

Social Security Lifts 15 Million Elderly Americans Out of Poverty

Without Social Security benefits, 37.8 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, 37.8 percent of elderly Americans would have incomes below the official poverty line, all else being equal; with Social Security benefits, only 9.7 percent do. (See Figure 1.) These benefits lift 14.8 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

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 2018, 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 1.2 million children out of poverty.[2]

Social Security records show that 2.9 million children under age 18 qualified for Social Security payments themselves in December 2018. (See Appendix Table 2.) Of these, 1.2 million were the survivor of a deceased worker. Another 1.3 million received payments because their parent had a severe disability. And 339,000 children under 18 received payments because their parent or guardian was retired.[3]

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 8.7 million elderly women out of poverty, as Table 2 shows.

Black 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, Black 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 Latino Americans would approach 50 percent, and the poverty rate among elderly Black Americans would exceed 50 percent.[4]

TABLE 2 Effect of Social Security on Elderly Poverty by Sex and Race, 2018 Percent in Poverty Demographic Group Excluding Social Security Including Social Security Number Lifted Out of Poverty by Social Security Sex Men 33.6% 8.1% 6,104,000 Women 41.3% 11.1% 8,707,000 Race/Ethnicity White 35.4% 7.3% 11,287,000 Black 50.5% 18.8% 1,525,000 Latino 47.2% 19.5% 1,260,000 Other 35.6% 12.7% 738,000 Total, Age 65+ 37.8% 9.7% 14,810,000

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 one-third of 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 New York, North Carolina, Ohio, and Pennsylvania.

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 including Social Security is 40 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. Effect of Social Security on Poverty (Supplemental Poverty Measure), 2018 Percent in Poverty Age Group Excluding Social Security Including Social Security Number Lifted Above the Poverty Line by Social Security Children Under 18 15.7% 13.7% 1,471,000 Adults Ages 18-64 16.2% 12.2% 7,837,000 Elderly Age 65 and Over 47.5% 13.6% 17,897,000 Total, All Ages 21.2% 12.8% 27,205,000

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 2018 were $12,043 for an elderly individual, $15,178 for an elderly couple, and $25,701 for an average family of four.[5] 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.[6] 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 2018. The state-by-state estimates are based on a three-year average (for 2016-2018) 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.[7]

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.[8] 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.

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.[9] 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, 2016-2018 Percent in Poverty Excluding Social Security Including Social Security Number Lifted Out of Poverty by Social Security Alabama 48.8% 10.6% 297,000 Alaska 29.8% 7.3% 20,000 Arizona 37.9% 11.4% 316,000 Arkansas 49.7% 11.6% 189,000 California 35.8% 10.6% 1,412,000 Colorado 29.0% 8.5% 165,000 Connecticut 28.4% 6.7% 130,000 Delaware 33.8% 7.5% 45,000 Dist. of Columbia 34.6% 18.1% 15,000 Florida 40.9% 10.3% 1,278,000 Georgia 44.4% 13.3% 424,000 Hawaii 30.0% 8.7% 54,000 Idaho 40.7% 6.9% 89,000 Illinois 33.7% 9.5% 470,000 Indiana 38.4% 9.4% 294,000 Iowa 35.0% 6.8% 140,000 Kansas 40.2% 7.9% 154,000 Kentucky 47.8% 12.3% 267,000 Louisiana 47.1% 14.1% 226,000 Maine 38.1% 8.5% 78,000 Maryland 27.5% 8.4% 173,000 Massachusetts 34.1% 8.9% 261,000 Michigan 35.3% 7.4% 462,000 Minnesota 32.0% 6.9% 224,000 Mississippi 54.8% 13.8% 186,000 Missouri 38.5% 8.5% 306,000 Montana 39.5% 6.4% 68,000 Nebraska 40.7% 8.6% 93,000 Nevada 39.5% 9.4% 148,000 New Hampshire 33.3% 5.1% 65,000 New Jersey 35.5% 8.2% 396,000 New Mexico 45.7% 11.8% 115,000 New York 36.2% 11.0% 813,000 North Carolina 43.3% 10.4% 542,000 North Dakota 35.2% 9.5% 27,000 Ohio 39.1% 8.9% 567,000 Oklahoma 42.6% 10.6% 197,000 Oregon 33.2% 6.9% 197,000 Pennsylvania 38.8% 9.2% 674,000 Puerto Rico* 69.3% 39.3% 194,000 Rhode Island 37.1% 8.8% 49,000 South Carolina 40.5% 8.8% 282,000 South Dakota 37.0% 10.3% 39,000 Tennessee 45.0% 9.3% 399,000 Texas 41.8% 12.0% 1,052,000 Utah 30.0% 6.0% 88,000 Vermont 38.1% 6.4% 37,000 Virginia 36.7% 9.2% 343,000 Washington 33.8% 7.0% 290,000 West Virginia 48.4% 11.0% 128,000 Wisconsin 35.3% 6.3% 281,000 Wyoming 37.3% 9.0% 26,000 Total, Persons Age 65+ 38.3% 9.8% 14,590,000