Social Security Minimum Benefits Fail to Prevent Senior Poverty

The Social Security program’s minimum benefit for retirees who have very low career earnings fails to prevent a beneficiary in this category from staying out of poverty, and the benefit itself is continually being eroded because of a design flaw. This is according to a new research brief released by the Boston College Center for Retirement Research (CRR), primarily based on findings by two of its researchers.

An enhancement of the minimum benefit is supported by a wide consensus of policy experts from across the political spectrum, according to the researchers’ findings. This consensus is “due to the functional demise of the current minimum benefit,” leading to a conclusion that “a new benefit is necessary to help protect long-career workers with low earnings from poverty,” according to the brief.

Major policy proposals have been introduced between 2009 and 2017 from politicians running the ideological gamut, including from Senator Bernie Sanders (I-VT) to former Speaker of the House Paul Ryan (R-WI). Two major ideas from the examined initiatives introduced by them and others include raising the minimum benefit and changing eligibility requirements. Many of the resulting costs stemming from these ideas – even accounting for differences in the details of each individual policy proposal – would have largely similar price tags.

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For instance, the plan introduced by Senator Sanders and Rep. Peter DeFazio (D-OR) in 2017 increases the benefit payout to between 120-125 percent of the poverty level for an individual, while also expanding eligibility by reducing the threshold needed for a year of earnings credit from $14,805 to the $5,440 amount used for the standard formula of the Social Security program.

Rep. Sam Johnson (R-TX) introduced a plan in 2016 that goes further on the benefit increase, but goes in a different direction from Sanders/DeFazio by increasing the number of years of earnings needed for a full benefit from 30 to 35.

The cost for both proposals as a percentage of taxable payroll over a period of 75 years is 0.17 percent for the Sanders/DeFazio plan, and 0.20 percent for the Johnson plan. The only outlier in this cost determination is then-Rep. Ryan’s 2010 proposal, which sits at only 0.01 percent on the same scale due to its limited eligibility structure, and the fact that its benefit level is not indexed to wages.

Still, while the differences in the details of each examined proposal can at times be stark, there is still an illustrated, bipartisan consensus on the need to change the rules surrounding Social Security’s minimum benefits.

“In any case, reforming the minimum benefit would clearly succeed in reducing poverty risk for some older Americans,” the brief’s conclusion reads.

Read the full brief at the Boston College Center for Retirement Research for a full breakdown of the data and its accompanying substantiation.

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