Social Security benefits can do a lot to help low-income Americans prepare for retirement, but those benefits alone are likely not enough to keep most people financially secure.
Social Security benefits can help partially offset unequal wealth distribution precipitated from the employer-based retirement system, according to a new report from The New School Schwartz Center for Economic Policy Analysis,
Researchers found that for the average worker between the ages of 51 and 56, accrued Social Security benefits exceeded employer-sponsored retirement wealth. Median accrued Social Security benefits were $81,900, while median employer-sponsored retirement benefits were $67,000.
For that same age group, the average low-wage worker has no retirement wealth from an employer-sponsored plan, and the highest 20 percent of earners typically have retirement wealth valued at two and a half times earnings. Factoring in Social Security benefits can help reduce that gap by providing lower-earners with a base income in retirement.
However, adding Social Security to employer-sponsored retirement savings still increases the wealth of the rich more than that of the low-income earners.
Researchers found that Social Security bumped low-earners’ median retirement wealth up to $57,000, and high earners’ median wealth up to $515,000.
“Though Social Security keeps most retirees out of poverty, almost all workers also need income from employer-based retirement savings to maintain pre-retirement living standards,” researchers wrote.
But, only 65 percent of workers nearing retirement have any wealth accumulated in an IRA, 401(k) or other retirement account. So, many are still facing a retirement crisis.
The study found that 40 percent of middle-class workers between the ages of 40 and 50 will fall into poverty in retirement.
As previously reported by FOX Business, Social Security benefits will increase by 1.6 percent in 2020. For a recipient earning $1,479, the average monthly benefit among all retired workers, checks will increase to about $1,503 per month.
The cost of living adjustment for 2018 was 2 percent, but it was largely perceived to be offset by increases in Medicare costs.
Senior groups have voiced concern that recent adjustments do not keep pace with increases in living expenses, particularly for items like housing, food and prescription drugs.
Social Security benefits have lost 33 percent of their buying power since 2000, according to the Senior Citizen’s League,
Social Security’s reserve funds are expected to be depleted in 2035, at which time the program will no longer be able to pay out benefits in full.