National Academy of Social Insurance Study Shows Retirees Heavily Depend On Social Security as Primary Source of Income

May 29, 2007

A report released by the National Academy of Social Insurance this month, shows that Social Security is the primary source of income for retirees - almost 90 percent of seniors are receiving half or more of their income from Social Security.

For the average income earner, Social Security replaces nearly 40 percent of a workers annual pre-retirement wages — a trend that could become a major issue for retirees in the near future.

As the Social Security retirement age goes up from age 65 to age 67, and Medicare premiums continue to rise at a rate faster than Social Security benefits, income replacement rates have and will continue to decline. The NASI report cites that for the average wage earner retiring in 2030, Social Security will only replace about 30 percent of pre-retirement income.

For people who retire earlier than age 65, which is often the case for many local and state government employees, Social Security benefits will replace even less income. This is particularly the case for public sector employees who do not pay into Social Security.

On the plus side however, public sector employees are often able to achieve a standard income replacement goal of 70 to 80 percent with their pension, Social Security (if they are eligible), and other supplemental retirement savings combined. Households without pension benefits typically only achieve a 55 percent median replacement rate, according to the NASI report.