The Cut in Social Security Benefits

The full retirement age for Social Security rose to 66 a few years ago. Going forward, it is going to increase steadily for new retirees. This article explains how an increase in the full retirement age is a benefit reduction for most retirees. It also provides some basic background on Social Security, such as how important it is to the annual incomes of many retirees.

Social Security benefits provide more than half of the household’s income for nearly half of married retirees and nearly three-quarters of unmarried retirees. Over one-fifth of married retirees and nearly half of unmarried retirees rely on the program for fully 90 percent of their income. This is because few Americans have substantial retirement savings outside of Social Security. In 2010, only 22 percent of full-time, private-sector employees had a defined-benefit retirement plan (i.e., a pension), and those plans that remain — both public and private — face significant financing challenges. Outside of traditional pensions, less than 60 percent of near-retirement-age households have any retirement savings, and among those who have savings the median balance is only $91,000. If used to purchase an annuity, this would support less than $5,000 per year in retirement income.