![handle is hein.crs/govekpy0001 and id is 1 raw text is: Congressional Research Servic
Informing the legiative debate since 1914
February 17, 2023
Retirement Income Security: Issues and Policies
Older Americans are an economically diverse group with
differing degrees of retirement preparedness. Median
household income for individuals ages 65 and older (or
aged individuals) was $51,906 in 2017 (CRS analysis of
2017 income data from the Health and Retirement Study
linked with Social Security records). One-fifth of
individuals ages 65 and older had household incomes of
less than $21,840, whereas another one-fifth had household
incomes of at least $110,897. Many in Congress have
expressed interest in improving retirement income security
for groups that are not adequately prepared for retirement.
Retirement Income Sources
Older Americans receive income from a variety of sources,
including public programs such as Social Security and
Supplemental Security Income (SSI); pensions (e.g.,
employer-sponsored defined benefit [DB] and defined
contribution [DC] plans) and retirement savings (e.g.,
Individual Retirement Accounts or IRAs); asset income
(e.g., business income, interest, dividends, and rents); and
earnings. Social Security was the largest source of income
among the aged in 2017, accounting for 28.0% of aggregate
income. Pensions and retirement savings constituted 25.8%
of income, and earnings accounted for 23.8%. The
remainder of aggregate income included income from
assets, public assistance (mainly SSI), and other sources.
The sources of income differed for aged individuals at the
lower end compared to the upper end of the household
income distribution (Figure 1). Social Security was the
largest source of income for aged individuals with relatively
low household income. The share of aggregate income from
Social Security significantly decreased as household
income increased. Pensions and retirement savings
provided between 18% and 33% of aggregate income for
aged individuals with relatively higher household income.
Asset income and earnings were important for those with
higher household income. Public assistance accounted for a
small percentage of aggregate income for most aged
individuals except for those with the lowest income.
Retirement income Adequacy
Whether people are financially adequately prepared for
retirement is the subject of debate and research. While no
standard definition exists, income adequacy in retirement
could mean whether income can meet basic needs (e.g.,
being above the poverty line) or whether income is
sufficient to maintain a preretirement standard of living.
SSI and other public assistance programs are designed to
ensure that eligible individuals have a minimum level of
resources. In contrast, Social Security and pensions, which
are based on earnings, are designed to help workers amass
enough resources to maintain their preretirement standard
of living in retirement. Social Security benefits replace a
greater share of career-average earnings for low-paid
workers than for high-paid workers. Therefore, Social
Security benefits generally comprise a higher share of
retirement income for low earners than for high earners
who have other retirement income.
For lower-income households, Social Security and SSI may
account for the largest share of a household's retirement
resources, in part because some low-income families are
typically unable to save for retirement after meeting regular
daily expenses during their working years. Because Social
Figure 1. Share of Aggregate Income from Each Source Among Individuals Ages 65 and Older, by Household
Income Quintile, 20 17
Household Income Pensions &
Quintile social Retirement Asset Public Other
(Median income) Security Savings Income Earnings Assistance Income
1st ($14,424) 83.2% 55% 1.6% 2.9 5.9 0.9%
2nd ($30,279) 66.4% 18.2% 4.2% 7.O% 0.5% %
3rd ($51, 3) 46.1% 275% 6.3 136% 0.3/ 62
4th ($81,579) 302% 33.2% 103% 19.6/ 0% 6
fth ($163,O8Q) 1.4% 25.7% 19.6/ 32.6 0.2 10.5
Source: CRS analysis of data from the 2018 Health and Retirement Study (HRS), reflecting income received in 2017.
Notes: Each household income quintile represents 20% of the individuals. The first quintile includes those with the lowest household income.
The fifth quintile includes those with the highest household income. Household income upper limits for quintiles one through four are $21,840,
$39,700, $64,295, and $110,897, respectively. (Dollar amounts shown in figure refer to medians within quintile range.) Pensions and retirement
savings include DB and DC pension plans and IRAs. Asset income includes business income, interest, dividends, and rent. Other income
includes veteran benefits, workers' compensation, unemployment compensation, alimony, child support, and financial assistance from outside](ViewImageLocal?handle=hein.crs/govekpy0001&div=1&collection=&method=preview&ext=.png&size=3)
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