Join the National Committee Renew Your Membership
National Committee to Preserve Social Security and Medicare National Committee to Preserve Social Security and Medicare
Social Security
Medicare
Other Aging Issues
Members and Supporters
Press Room





  • Become Involved
  • About Us
  • Contact Us
  • Resources


  • Home Page
  • Increase Text Size
  • Decrease Text Size

    Social Security 75 Years: Keeping the Promise


    • Email This Page to A Friend Print This Page

    V I E W P O I N T

    Social Security Privatization Would Threaten the Retirement Security of Rural Americans

    Rural America is home to 59.1 million Americans or about 21 percent of our country's population. 1 Rural areas are disproportionately filled with seniors who rely on the Social Security program to deliver vital benefits every month. Social Security privatization would hit rural Americans especially hard by dramatically reducing the guaranteed monthly benefits they can expect to receive in retirement.

    Profile of Seniors in Rural America

    Rural communities have larger and older senior populations than their urban counterparts and this situation is likely to continue. The median age of rural America is 38; whereas, the median age of metropolitan America is 34. 2  Moreover, seniors comprise a larger share of the total population in rural areas than in urban areas. Older Americans represent nearly 20 percent of the population of rural counties compared to 15 percent of the population of metropolitan counties. Rural areas, especially those dependent on farming and mining, have been losing their working-age population as the younger generation migrates out to urban areas more likely to offer jobs. This leaves rural counties with disproportionately large senior populations and creates budget pressures as local governments struggle to deliver needed health care and social services. 3

    Figure One: Percent of Older Persons as a Share of Total Population (2001)

    Source: United States Department of Agriculture, Economic Research Service. "Rural Population and Migration: Rural Elderly". Available at http://www.ers.usda.gov/briefing/Population/elderly/.

    Rural Americans earn less income than their urban counterparts and live in communities with higher poverty rates. Americans living in rural areas earn less throughout their working lives and receive a median household income that is about $10,600 less than urban Americans. 4  Consequently, poverty is more prevalent in rural America with the poor representing 13 percent of the senior population in rural areas, compared to 9 percent of the senior population in urban areas. 5  The most remote rural areas (those not adjacent to urban counties) have the highest and most persistent poverty rates. Rural counties represent 340 out of the 386 counties identified by the federal government as persistent poverty counties. 6

    Figure Two: Median Household Income (2002)
    Source: United States Department of Agriculture, Economic Research Service. "Rural Poverty at a Glance." Rural Development Research Report Number 100. July 2004. Available at http://www.ers.usda.gov/publications/rdrr100/rdrr100.pdf

    Figure Three: Percent of Older Persons in Living in Poverty (2000)

    Source: United States Department of Agriculture, Economic Research Service. "Rural Population and Migration: Rural Elderly". Available at http://www.ers.usda.gov/briefing/Population/elderly/ .

    Women in rural areas tend to have longer life spans and less retirement income than men in rural areas. Women represent 53 percent of the population age 60-64 in rural counties, and 68 percent of the population age 85 and older. 7Due to their longer life spans, women are more likely to become widowed and live alone. As a result, women are especially vulnerable to declining standards of living in retirement. Fifteen percent of rural women age 60 and older are poor, compared to 11 percent of men. Moreover, as women age they have a greater likelihood of becoming poor. Rural women with incomes less than $10,000 represent 66 percent of the population age 60 and older and 80 percent of the population age 85 and older. 8

    Figure Four: Women as a Percent of the Senior Population in Rural Counties (2001)
    Source: United States Department of Agriculture, Economic Research Service. "Rural Population and Migration: Rural Elderly". Available at http://www.ers.usda.gov/briefing/Population/elderly/ .

    Figure Five: Percent of Rural Seniors Living in Poverty by Gender (2000)

    Source: United States Department of Agriculture, Economic Research Service. "Rural Population and Migration: Rural Elderly". Available at http://www.ers.usda.gov/briefing/Population/elderly/

    Rural Americans are less likely to have other sources of retirement income, such as employer-sponsored pensions and personal savings. 9Agricultural workers are significantly less likely to be offered an employer-sponsored pension and to participate in a retirement plan than workers in other economic sectors. Specifically, about 30 percent of agricultural workers work for an employer who offers a pension plan and nearly 24 percent of workers participate. In the total U.S. workforce, nearly 60 percent of employers offer a pension plan and about 48 percent of workers participate. 10The lack of employer-sponsored pensions makes it even more crucial for agricultural workers and rural Americans to accrue secure retirement savings. Unfortunately, rural Americans earn less than urban Americans, making saving for retirement a challenge. Furthermore, the income of agricultural workers is subject to more extreme variability compared to other U.S. households due to unpredictable weather, disease outbreaks, business cycles, export demand, trade wars, and macroeconomic policies. 11

    Figure Six: Percent of Pension Participation Among Agricultural Workers and All Workers

    Source: American Corn Growers & Americans for a Secure Retirement. "Lifetime Income Crucial to Farmer's Retirement Security." Joint Issue Brief. May 2005. Available at http://www.paycheckforlife.org/images/Ag_Issue_Brief_FINAL.PDF

    Social Security is Vital to the Economic Security of Rural Americans

    Because rural Americans tend to be older, earn less money throughout their working lives, and possess fewer resources in retirement, they are more reliant on Social Security to provide a stable and guaranteed retirement benefit.

    Rural Americans are more likely to receive Social Security than their urban counterparts. Eighty-six percent of rural seniors age 60 and over receive Social Security, compared with 81 percent of urban seniors 12. In particular, rural Americans are more likely to receive Social Security disability benefits. 13

    Millions of rural Americans receive billions of dollars in monthly Social Security checks. A recent study found that about 8.2 million rural Americans receive monthly Social Security benefits, including: 5.4 million retirement beneficiaries, 1.5 million disability beneficiaries, and 1.3 million survivors' beneficiaries. 14The Social Security benefits received by rural elderly far exceed the funds they receive from federal farm programs. In fiscal year 2000, rural seniors received 3.5 times more Social Security dollars than federal farm dollars. 15

    In some states, rural counties receive disproportionately more in Social Security benefits than their urban counterparts. In Iowa , for example, rural counties have a smaller overall population but at the same time have a larger number of Social Security beneficiaries. In 2003, rural counties in Iowa paid Social Security benefits to 293,000 people compared to urban counties which paid benefits to about 253,000 people. Social Security also paid a larger amount in benefits to rural counties in Iowa than it did to urban counties ($242 million versus $222 million). This means, on a per capita basis, Social Security delivered $180 to rural areas in Iowa compared to $139 to urban areas. 16

    Social Security Privatization Would Threaten Rural Americans

    The benefit cuts entailed in Social Security privatization proposals would jeopardize the economic security of rural Americans. Rural Americans are particularly reliant on Social Security because they tend to earn less income throughout their working lives and face unique challenges in saving for retirement. Privatization proposals would dramatically reduce Social Security income through a number of significant benefit reductions. Under the indexation plan endorsed by the President, benefits would be slashed for 70 percent of future retirees - all those whose lifetime average earnings are more than $20,000 a year. The reductions would cut benefits by up to one-half for these workers. In addition, those who opted to participate in a private account would see an additional cut because their Social Security benefit would be reduced for every dollar they contributed to their private account plus interest and inflation. The combination of these two benefit cuts could reduce Social Security benefits by 66 percent for an average worker retiring in 2055. 17

    Rural Americans are already exposed to enough financial risk without injecting it into their Social Security benefit. Social Security provides a secure source of retirement income that lasts as long as you live. It also provides a cost-of-living adjustment so that inflation does not erode the value of Social Security benefits over time. Agricultural workers, including farmers, rely on Social Security's guaranteed benefits because their income is subject to the volatilities of nature, global competition and shifting national farm policies. 18Privatization places the entire risk of having a decent retirement income on the individual, instead of spreading risk throughout the workforce as Social Security currently does. Even relatively safe investments, such as state or local government bonds, are subject to potentially significant risk for an individual investor. Stock markets can go both up and down, and relying on private accounts means people will have to carefully time their retirement to avoid the bad years. 19 For rural Americans, private accounts add market fluctuations to already volatile incomes, further amplifying their exposure to risk.

    Social Security privatization substantially increases the federal debt and leaves future generations of rural Americans to deal with the consequences. Diverting money out of the Social Security trust fund and into private accounts worsens Social Security's long-term financial outlook. Many privatization plans rely on increased borrowing from foreign nations to pay Social Security benefits. According to estimates by the Congressional Budget Office and the Office of Management and Budget, debt held by the public will reach an astonishing $4.7 trillion in 2005. The President's plan to privatize Social Security would add about $5 trillion dollars to our federal debt over the first 20 years it was in effect and it would continue to increase the federal debt until 2067. 20

    This means the accumulation of budget deficits through this nation's entire history will be doubled in the next two decades as a result of this single proposal, completely independent of future deficits already anticipated in other areas of the budget. Debt of this magnitude would have serious repercussions for rural Americans who are living in communities with declining tax bases and who are working in an economic sector that is highly sensitive to changes in interest rates. Rural Americans would feel squeezed between rising interest rates and slower long-term economic growth, two hallmarks of rising federal debt.

    Department of Policy Research, June 2005

    The National Committee is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the board of directors and professional staff. The work of the National Committee is directed toward developing a secure retirement for all Americans.