Short-term security - Social Security and benefits expectations by age group

American Demographics, April, 1997 by Shannon Dortch

Thousands of companies are in love with senior citizens. They have high hopes for selling everything from travel to personal-care products to the retirees of tomorrow, particularly baby boomers, the oldest of whom will be eligible for full Social Security retirement benefits in 2012.

The U.S. Social Security Administration (SSA) is interested in future retirees, also. But rather than looking to sell things to retired workers, the SSA is concerned with meeting its obligation to provide monthly cash payments to an estimated 14.2 million of them in 1997. The administration certainly is interested in the effect of the baby boom on the nation's retirement program. But it also has to focus on short-term demands on the system, which is why it produces annual projections of the number of Americans who may draw benefits under three of its major insurance programs: old-age, survivors, and disability. Current projections are to

These data tell us the number of people who are eligible for benefits under the three programs, the number who could actually receive cash payments, and the average amount they are projected to receive. Does it matter who and how much older Americans receive from the government each month? You bet it does, especially for companies who want to target the elderly. Retirement benefits in particular make up a surprisingly large share of elderly incomes, and U.S. retirees enjoy annual increases in their benefits to cover cost-of-living increases.

Adults aged 50 and older today are significantly more likely than average to plan on Social Security benefits as a major source of income in retirement, according to a 1995 Gallup Poll Monthly survey by the Gallup Organization. Forty-six percent are counting on cash from the program, compared with 29 percent of all adults aged 18 and older. Personal savings will be a major source of retirement income for a smaller 31 percent share of people aged 50 and older, as will company pensions, at 30 percent.

These figures are particularly telling, because adults aged 50 and older have relatively little time left in their working lives to prepare for retirement. Younger adults, on the other hand, are half as likely as their older counterparts to anticipate Social Security as a major source of income in retirement. Only 23 percent of adults aged 30 to 49 say so. They are instead planning on their personal savings (49 percent) and 401K-type savings plans (43 percent) to make them comfortable in retirement.

Since younger generations doubt that Social Security will be available to them in the same way it now serves the nations elderly, the role of cash benefits in their spending is yet to be seen. However, we do know what Social Security benefits mean to retired Americans today. And the people who will retire in are likely to share their reliance on the old-age insurance program.

Ninety-two percent of Americans aged 65 and older receive some income from the Social Security retirement program. When those who receive disability or survivors, benefits under the system are included, the share increases to 98 percent, according to the Census Bureau's March 1996 Current Population Survey. The average American aged 65 and older has a mean annual income of $17,600, 45 percent of which comes from Social Security retirement payments. Sixty-two percent of the mean income of elderly Hispanics comes from these benefit checks, compared with 55 percent for blacks and percent for whites.

These estimates are probably slightly low, since the average amount of Social Security retirement benefits received includes the few people aged 65 and older who received none. The SSA estimates the average monthly benefit for men at year-end 1997 at $870 and $670 for women. This includes the estimated cost-of-living increase for the upcoming year. Granted, inflation rates depend on dozens of economic variables. But the SSA's best estimate is that the average monthly benefit for men in current payment status on December 31 may increase 39 percent between 1997 and 2005, to $1,207. The expected increase for women is about the same, at percent, but the projected average monthly benefit in 2005 is lower, at $937.

Not everyone who qualifies for retirement benefits gets them, but the share of elderly adults whose benefits are withheld in a given year has declined since 1975, and is expected to continue declining to 2001, and then increase slightly to 2005. For the duration of the projection period, retired adults qualify for reduced Social Security benefits at age 62 and full benefits at age 65. On December 31, 1975, 4.6 percent of men aged 62 and older and 1.7 percent of women had retirement benefits withheld. In 2005, the shares are projected at 0.9 percent and 0.12 percent, respectively.

There are a number of reasons why retirement benefits are withheld. The SSA often has difficulty locating elderly adults whose living arrangements have changed. Death also plays a role, particularly in the case of those aged 95 and older. The shares of both men and women this age with benefits withheld is much greater than average, probably because of the administrative lag in notification of death.