3 2 My the benefits received by name is Dallas Salisb retirees today ury and I am, the President and 23 perce and Chief E nt are somew xecutive Offi hat confident, 37 percent cer of the non-partisan of workers T-164 are and non-profit Em not at all confident that future Soci ployee Benefit Research Institu al Security benefits will m te (EBRI). Esta atch or exc blished in 1978, EBRI is eed the value of today’s 6 comm benefits, a gradual increase over the pa itted exclusively to data dissemination, policy st eight years from research, a 30 percent nd education on financial security not at all confident in 2002. an d em The percentage of retirees sa ployee benefits. EBRI does not lob ying they b are y or advoca very confident about the future val te specific policy recommu endations; the m e of Social Security ission 7 is to provide benefits has gradually objective and reliable research and inform decreased from a high of 28 percent in 2001 to just 11 ation. All of our resear percent in 2010. ch is available on the Internet at www.ebri.org and our savings and financial education material is at Statement for the Record www.choo The 2010 Re setirement Confidence Survey tosave.org explored public attitudes about four commonly proposed changes. Workers are most likely to favor gradually reducing the current rate of benefits paid by for the As Social Security Social Security, so that pe turns 7ople with higher incom 5, it is important to acknowledge ho es have their benefits cut back m w this program rema ore than those with ins an extremely significant percentage of incom lower incomes (55 percent of workers e for the elderly vs. 45 percen (age 65 and ol t of retirees). der). As not In contrast, ed in retirees are m EBRI’s Databook o ost likely n United States House Committee on Ways & Means, Subcommittee on Social Security Employee Benefits to favor increasing the age at which pe , “Chapter 7: Sourceople can begin receiving full retire s of Income for Persons Age 55 and ment benefits by Over,” from 1975 through one year 1 2008, three-fifths of the elderly (59 percent of retirees vs. 45 percent of workers). received 65 percent Roughl or more of their incom y 4 in 10 each report e from they Social Security favor raising the . Hearing on pay The oldest age group of the elderly roll tax paid by workers for this , th program ose age 85 a from 6.2 percent to 7.2 percent nd over, receives a greater percentage of their total (40 percent of workers, 45 percent of retirees), wh income from Social Security ile about one-quarter favo than those in the youngr reducing th er age groups. In 2 e current rate of benefits b 008, elderly persons age 85 y 5 July 15, 2010 8 percent for all new recipients (23 perce and over derived 54.5 percent of their incom nt of workers, 26 percent e from Social Security of retirees). , compared with 29.7 p ercent for those ages 65–69, as was detailed in the EBRI Notes article, “Income of the Elderly Population Age 2 th “Social Security at 75 Years: More Necessary Now than Ever” EBRI release 65 and Over, 2008,” Ju d the 2010 R ne e 2010, vol. 31 tirement Readiness Rating™ on Jul , no.6. y 13 , 2010, in (EBRI Issue Brief no. 344, July 2010, “The EBRI Retirement Readiness Rating:™ Retirement Income Preparation and I would emphasize this point with my own family. My father retired in 1978 with social security, a Future Prospects”). The report included analysis of possible changes in Social Security, and in the defined benefit annuity, a defined contribution account, and savings. From the time he died at nearly process underlines the importance of the program. The analysis looks at what the impact would be By 94, until my mother died three years later, also just short of 94, her only income source was Social on the future risk of running short of retirement resources of reduction of Social Security benefits to Security. match currently expected payroll taxes; reductions in Medicare; and adding a 3% individual account Dallas Salisbury to Social Security. Looking just at a reduction in Social Security benefits, the impact should be Reliance on Social Security also significantly differs by marital status, gender, and race, as minimal for those currently on the verge of retirement—so the “at-risk” level for Early Boomers President & CEO highlighted in the same EBRI Notes article from June 2010. Nonmarried persons receive a larger increases by only 0.3 percentage points. Employee Benefit Research Institute 3 share of their income from Social Security than married persons (47.1 percent versus 35.3 percent). But Late Boomers will have a larger percentage of their expected Social Security benefits reduced as Additionally, elderly women derived a greater share of their income from Social Security and assets than elderly a result of this change, an men in 2008. Social Security d their “at-risk” level increases b accounted for 48.4 pe y 1.6 rcent of elderly percentage points under t women's incom he baseline e, 4 www.ebri.org com assum pared with 33.7 perce ptions. Gen Xers will have even m nt of elderly me on’ re y s incom ears of their expected retirem e. Lastly, significant differences exist ent affected by this when analy change, and t zing dependence on heir increase in “at-risk” p Social Security ercentage is by race. Noted in simulated to EBRI’s Databook on Employee Benefits be 5.8 percentage points. Given that , the Gen Xer “Chapter 7: Sources o cohort would f Incom experience a significantly larger effect under this m e for Persons Age 55 and Over,” elderly Hispanic (47.0 percent) and odification, this cohort African-Americans (46.9 percent) received more of their total income from Social Security than is the exclusive focus when analyzing the impact by preretirement income quartile. 5 Pacific Islanders (43.4 percent), whites (38.4 percent), and Asian-Americans (33.7 percent). Since Social Security represents a larger percentage of total retirement income for retirees with lower Nevertheless, whether comparing Social Security dependence by age, marital status, gender, or race, income, it would be expected that the lowest-income quartile would experience a larger overall it is clear that Americans are not saving enough for retirement, resulting in a huge dependence on impact from the proposed Social Security benefit decrease than their higher income counterparts. Social Security. This is borne out by the results in Figure 12 in Issue Brief no. 344. The lowest-income quartile is simulated to have an increase of 7.2 percentage points in their “at-risk” level, compared with only 6.9 While today’s retirees are extremely reliant on the success and continuation of Social Security, percentage points for the second quartile, 5.2 percentage points for the third quartile, and 4.2 workers confidence that Social Security will continue to provide benefits of at least equal value to percentage points for the highest-income quartile. benefits received by retirees today has declined over time. EBRI’s Issue Brief, no. 340, March 2010, “The 2010 Retirement Confidence Survey: Confidence Stabilizing, but Preparations Continue to In conclusion, EBRI work underlines the significant role of Social Security for today’s retirees, and Erode,” and those of the last 20 years, have explored this issue. Seven percent of workers are very for the income security prospects of those yet to retire. confident that the Social Security system will continue to provide benefits of at least equal value to The views expressed in this statement are solely those of Dallas L. Salisbury and should not be attributed to the Employee Benefit Research Institute (EBRI), the EBRI Education and Research Fund, any of its programs, officers, ### trustees, sponsors, other staff, or any other individual or organization. The Employee Benefit Research Institute is a 1 Chart 7.2 with data points from Table 7.5 contains complete statistics. nonprofit, nonpartisan, education and research organization established in Washington, DC, in 1978. The testimony 2 Figure 5 on page 5. draws heavily from research publications of the Employee Benefit Research Institute, but any errors or 6 3 Figu Figur re e 6 on 43 on p pag age e6 3 . 8. misinterpretations are those of the witness. 4 7 Figu Figur re e 7. 44 on page 39. 5 8 D Figu ata is re 47 fro on m mer pagg e 4 ed year 1. s 2005-2007. See Table 7.2 Additional Data. Em Employee Benefi ployee Benefit Research Institute, T-1 t Research Institute, T-16 64 4