Retirement Income

The U.S. elderly population has tripled since 1940 and will more than double by 2050, according to Census Bureau projections. The population of "very old"--those aged 85 and older--will increase fivefold. The elderly are expected to make up 20 percent of the U.S. population as early as 2030 compared with 13 percent today. These dramatic demographic trends raise questions about the future financing, availability, and protection of retirement income for the nation's elderly. This report provides information on (1) demographic and economic trends affecting retirement income, (2) the status of Social Security's long-term financing problems and proposals to address them, and (3) the extent of pension coverage and retirement saving and how to ensure that Americans can count on them throughout their retirement years.

GAO noted that: (1) as the elderly live longer, they will need retirement income over longer periods; (2) since fertility rates have been declining, the number of the elderly will grow as a share of the population; (3) while the income of the elderly has improved considerably over the past 50 years, demographic trends may slow or reverse such improvements; (4) the nation must confront how the trends will affect the distribution of income between workers and retirees, between the population's working and retirement years, and between high and low earners; (5) these trends pose long-term financing challenges for both Social Security and the federal budget; (6) currently, Social Security revenues exceed expenditures; (7) the excess revenues are invested by law in federal government securities and make the total federal deficit lower than it would be otherwise; however, in just 15 years, expenditures are expected to exceed cash revenues, according to Social Security Administration (SSA) projections; (8) at that point, the government's general fund will have to make up the difference--in effect, repaying funds owed to Social Security; (9) such repayment will present a significant and growing challenge for the overall federal budget; (10) by 2029, without corrective action, the trust funds will be depleted, and Social Security's revenues will fund only 70 to 77 percent of benefits; (11) to restore Social Security's long-term financial balance, a number of reform options are available within the current structure of the program; (12) some proposals go beyond restoring financial balance and call for fundamentally restructuring the Social Security system; (13) these proposals attempt to shift more of the responsibility for retirement income from the federal government to individuals; (14) solutions to Social Security's problems will inevitably affect other sources of income and could give them an even more significant role; (15) the proportion of workers covered by pensions has not increased substantially since 1970; (16) ensuring that Americans have enough retirement income to meet their needs will require that the nation and the Congress make some difficult choices; (17) Social Security has been an effective agent for ensuring a reliable source of retirement income and greatly reducing poverty among the elderly; (18) the effect of changes to the system on other retirement income sources and their effects on various groups within the elderly population should be well understood before decisions are made; and (19) the interplay of budget and savings effects will have to be carefully considered before any reform proposal is adopted.