Industry News

On January 22, 2020, the Center for Retirement Research at Boston College (CRR) published its issue brief, Social Security Is a Great Stabilizer.  The brief examines the importance of the effect of Social Security on the relative economic status of retirees by race and ethnicity.  Specifically, the analysis examines Social Security as a source of retirement wealth for whites, blacks, and Hispanics for five birth cohorts of those ages 51-56 between 1992 and 2016 based on data from the Health and Retirement Study (HRS).

Key findings include:

• According to CRR, without Social Security, the retirement wealth held by white households averages 5 to 7 times the wealth of a minority household.
• However, when adding in Social Security, the retirement wealth held by white households drops to about 2.5 times the wealth of a minority household.
• Social Security has a comparable leveling effect across the distribution of wealth, which is significant for lower- and middle-income households.
• Social Security reduces inequality since it covers almost all workers and has a progressive benefit design, which helps to make it the most equal form of retirement wealth since it provides much higher benefits relative to earnings for lower-wage workers than for higher-wage workers.

The brief concludes, “As policymakers begin to consider options to bring Social Security into fiscal balance, it may be worth considering the effect of any potential changes on the distribution of retirement wealth.  Some policies that would reduce benefits, such as increases in the Full Retirement Age, would tend to increase retirement wealth inequality.”

The brief is available here.