How Much Do Americans Depend on Social Security?

Policy Reports | Social Security

No. 301
Tuesday, August 07, 2007
by Laurence J. Kotlikoff, Ben Marx and Pietro Rizza


The value of projected Social Security benefits over the next 75 years exceeds estimated payroll tax revenues by $4.6 trillion. Clearly, future benefit levels are not sustainable under current law. 2 There are a number of options to close this enormous fiscal gap, including different combinations of Social Security benefit reductions and payroll tax increases.

"High-wage workers depend on Social Security for a substantial portion of their retirement income."

One proposal is to cut the benefits of high-income workers. While it is widely recognized that most low-wage workers depend on Social Security for their retirement income, it is commonly assumed that high-wage workers can maintain their standard of living without Social Security benefits, due to their private pensions and savings. However, even high-wage workers depend on Social Security for a sizable portion of their retirement income. This study analyzes stylized households to examine the degree to which today's workers depend on Social Security to maintain their living standards in retirement. It also shows how they would be affected by the disappearance or reduction of projected Social Security benefits, and how they would change their behavior in response.

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