Social Security is Already Our Best Anti-Poverty Program—Don’t Make This Radical Change—Center for Retirement Research

Changing Social Security to a uniform benefit for all would put workers and poor alike at risk.

Social Security is the country's most important and popular program. However, changes will soon be needed because once the retirement trust fund is depleted in 2033, the plan will not be able to pay full benefits. While many options have been proposed to address the financing problems within Social Security's current structure, one major report and two books (Biggs and Boccia & Nachkebia) recommend fundamental changes to the program. Although the details differ, all three proposals would transform Social Security from a wage replacement program into a program that provides uniform benefits to all with the goal of reducing poverty.

A major redesign of Social Security is not only unnecessary, it is also risky for the poor. While fixed payments may not be means-tested at the outset, pressure to limit general revenue spending will increase over time. Evidence from the United States shows that means-tested efforts funded through general revenue are fragile. The latest and shocking evidence is the recent cuts to Medicaid and SNAP (formerly food stamps) in last year’s Big Beautiful Act. But equally frustrating is the gradual erosion of the country's Supplemental Security Income (SSI) program, which is designed to alleviate poverty for people over 65 and people with disabilities.

While poverty rates can be measured in a variety of ways, they all essentially tell the same story – about 10 percent of people over 65. The bottom line is that while the poverty rate among older Americans was significantly higher than among other adults in the 1960s, the situation is much the same today (see Figure 1). This improvement is due to the development of Social Security programs, which allow retirees' incomes to keep up with rising living standards by tying initial benefits to wages and then to prices after retirement.

In fact, Social Security is the primary source of income for people over 65 with incomes below the poverty line (see Figure 2). Only 10% comes from SSI and other forms of means-tested schemes.

This pattern of little support from means-tested sources reflects the fact that in the United States, programs designed specifically for the poor are bad programs—their benefits diminish over time; constant income and asset tests reduce the eligible population; and they are costly to administer. By contrast, programs like Social Security—in which everyone participates and receives benefits—are the surest way to ensure income for low-income earners.

That is, for those with weaker ties to the workforce, social security alone is not enough. To meet this need, Congress enacted the SSI program in 1972, which nationalized the state welfare program for adults over 65 and persons with disabilities. But the program, which began paying benefits in 1974, has not been updated in time, and the share of people over 65 receiving SSI benefits has dropped from 9% to 2% (see Figure 3).

We do need to end poverty among older Americans, but the answer lies in strengthening SSI, which has been allowed to fall by the wayside. SSI offers very limited benefits because its asset limits and income exemptions have not been updated in decades. More specifically, since 1989, the asset limit (ie, beneficiaries can only keep $2,000 in savings) has been frozen. Furthermore, working beneficiaries can only keep $65 of their earnings each month, with benefits reduced by $1 for every $2 earned thereafter, while Social Security recipients can only keep $20 of their monthly check, with no reduction in SSI benefits.

Let's update SSI and maintain Social Security's current structure to best protect poor older Americans.