How Generous Is The Federal Government To Seniors?

NCPA Study Shows Benefits Provide Seniors with Higher Standard of Living in Retirement

DALLAS (October 27, 2006) – Rapidly growing federal benefits for seniors are so generous they will soon provide recipients with a higher standard of living during retirement than they had when they were working, according to a new study from the National Center for Policy Analysis (NCPA). The study also notes that Medicare benefits will eclipse a person's Social Security benefits in just two decades.

"We're surprisingly generous to seniors," said NCPA Senior Policy Analyst Matt Moore. "Government benefits alone will allow many of today's workers to enjoy a higher standard of living in retirement than they had when they were working."

The study compares consumption before and after retirement, including health care benefits provided by employers and by Medicare.

According to the study:

  • Social Security and Medicare alone replaces more than 85 percent of a person's total pre-retirement consumption for people retiring this year;
  • For workers retiring in 20 years, Social Security and Medicare benefits will replace more than 105 percent of pre-retirement consumption.
  • As a result, annual consumption for today's middle-age workers will be greater after retirement than before due to government benefits alone.

The study also notes that in government benefits, almost all of the increase will be due to the rapid growth in Medicare. For example, although Medicare benefits are currently 70 percent of Social Security for new retirees, Medicare benefits will be larger than Social Security for workers younger than age 37.

"Federal spending on retirees is expected to grow rapidly in coming years," said Andrew Rettenmaier, executive associate director of the Private Enterprise Research Center at Texas A&M University and an NCPA Senior Fellow who co-authored the study. "Paying for the commitments to the elderly will soon require substantial tax increases or cuts to other programs."