Social Security

Study #301 - How Much Do Americans Depend on Social Security?

Social Security benefits over the next 75 years will exceed payroll tax revenues by $4.6 trillion. To close this enormous fiscal gap, one proposal is to cut the benefits of high-income workers. Many low-income workers depend almost entirely on Social Security for their retirement income, but it is often assumed that high-wage workers can maintain their standard of living without Social Security benefits due to their private pensions and savings. Surprisingly, however, even high-wage workers depend on Social Security for a substantial portion of their retirement income and would significantly change their consumption and saving behavior in the absence of Social Security.

This study is based on modeling of representative households. Living standards are measured by the dollars available for discretionary consumption after subtracting such “off the top” expenditures as taxes, contributions to tax-favored savings, mortgage payments, college tuition and life insurance premiums. The model assumes that, other things equal, people will try to maintain their standard of living by evening out their consumption over their remaining lifetimes.