Americans 65 and older get more income from Social Security than from any other source, according to a study in the July Social Security Bulletin.
The study found that, measured in constant 1984 dollars, the typical elderly married couple's total cash income from Social Security, earnings and all other sources rose from $9,780 in 1962 to $17,250 in 1984. The typical nonmarried elderly person's income rose from $3,840 to $6,690 during the same period.
Social Security was by far the largest source of income, particularly for low-income elderly.
The study found that the elderly derived 38 percent of their cash income from Social Security, one percent from Railroad Retirement benefits, 7 percent from government employe pensions, 6 percent from private pensions and annuities, 16 percent from job earnings, 28 percent from interest and dividends or other returns on assets, one percent from welfare and 2 percent from various other sources.
The low-income elderly got a much higher portion of their cash income from Social Security, reflecting the fact that they lacked other pensions or assets and did not generally have jobs. Thus, couples or singles with total income less than $5,000 got 77 percent of it from Social Security, those between $5,000 and $10,000 got 71 percent from Social Security, those between $10,000 and $20,000 got 48 percent from Social Security and those with total income exceeding $20,000 got 20 percent of it from Social Security.
Many of the latter group were persons with substantial income-producing assets or persons who continued to work after reaching 65.
One reason Social Security plays such a large role in total income is that the real value of Social Security benefits after adjustment for inflation rose substantially from 1960 to 1984. This was caused by congressional passage of a number of major benefit increases in the 1960s and early 1970s, plus a 1972 provision authorizing an automatic annual cost-of-living increase so that benefits would not be eroded by inflation.
As a result, the study found, "In constant 1984 dollars, the average monthly benefit for retired workers grew from $257 in 1960 to $461 in 1984."
The study found that the increase in the real value of Social Security benefits occurred despite the fact that an increasingly large percentage of workers were retiring before 65 and therefore receiving a permanently reduced benefit.
When this provision became effective a generation ago, only a handful of people chose it. But by 1984 three of every five male workers and seven of 10 female workers were retiring before age 65.