Social Security protects families if a worker retires, becomes disabled or dies. These guaranteed insurance benefits are especially crucial to people of color who tend to have fewer alternative resources, become disabled at higher rates, and rely on Social Security’s family benefit features disproportionately. Social Security provides many elderly Latinx with their sole or primary source of income in retirement.
Today’s Latinx workers are concentrated in low-wage jobs that typically lack pension coverage. Latinx experience high poverty and underemployment and have less ability to save and invest for retirement than most other Americans. Because of low incomes throughout their working lives, elderly Latinx may not have been able to accumulate savings and may depend almost exclusively on Social Security for their retirement income. Therefore, preserving the system with guaranteed benefits is crucial for the Latinx community.
Latinx Rely on Social Security for More of Their Retirement Income
While Social Security is expected to be only one part of a person’s retirement income, many minorities rely on it for a large share. Because Latinx tend to have lower earnings and less pension coverage than white Americans, Social Security is extremely important for Latinx retirees. In 2017, among Latinx receiving Social Security, 40 percent of elderly married couples and 61 percent of elderly unmarried persons relied on Social Security for 90 percent or more of their income.
Communities of color rely more heavily on Social Security due to a lack of other income in retirement, especially income from assets. In 2016, white families had about six times more in average liquid retirement savings than Latinx families. This is because workers with lower earnings have a harder time saving. The average white man earns $2.7 million over a lifetime, while the average Latino man earns $2.0 million.
Elderly Latinx are more dependent on Social Security than others because they are more likely to be living in poverty than non-Latinx elderly. They are also more likely to have been poor prior to old age than non-Latinx. Social Security reduces poverty for Latinx elderly. In 2017, the average annual Social Security income received by Latino men 65 years and older was $14,414 and $11,986 for women. This compares to $18,785 for all men and $14,923 for all women.
- In 2016, 18.1% of Latinx 65 years old and older had income below the poverty line, compared to 7.2% of white elderly.
- Without Social Security, 47.2% of Latinx would be living in poverty.
Program Aspects of Importance to Latinx Americans
Social Security provides many elderly Latinx with their sole or primary source of income in retirement. Although Social Security’s benefit and contribution provisions are neutral with respect to race, ethnicity and gender, several features of the program are especially important to Latinx. The progressive benefit formula intentionally helps low income earners, many of whom are Latinx.
In the aggregate, Latinx Americans have higher disability rates and lower lifetime earnings, and thus receive greater benefits relative to taxes paid. Furthermore, due to higher than average life expectancy, Latinx benefit from the Social Security program’s annual cost-of-living adjustment. An examination of socioeconomic and demographic factors’ influence on Social Security taxes paid and benefits received reveals that the program plays an extremely important role for Latinx Americans.
Progressive Benefit Formula
Social Security employs a progressive formula that intentionally returns a higher percentage of wages to low-and average-wage earners than it returns to those who have had high earnings. Lifetime earnings directly factor into Social Security’s progressive benefit formula. Latinx, on average, have lower levels of lifetime earnings than white workers.
The median earnings of working-age Latinx in 2017 were about $35,000 compared to $48,000 for all Americans. As a result of their over-representation among workers receiving the lowest earnings and their under-representation among workers receiving the highest level of earnings, Latinx gain from Social Security’s progressive benefit formula.
Latinx Americans have higher rates of disability and consequently are more likely to receive benefits from the Social Security Disability Insurance (DI) program. In general, workers with a higher probability of becoming disabled have a higher benefits-received-to-taxes-paid ratio than those who are not disabled. This is because DI beneficiaries begin to receive benefits and cease contributing payroll taxes at an earlier age than workers who are not disabled.
A high incidence of disability among Latinx Americans increases their benefit-to-tax ratio. Moreover, because low-wage DI beneficiaries also gain from the program’s progressive benefit formula, low-wage disabled workers benefit from two aspects of the program. Latinx Americans are disproportionately represented among both disabled workers and low-wage earners. Thus, DI plays an important role for Latinx Americans.
Life Expectancy/Cost of Living Adjustment
Latinx Americans gain from a guaranteed benefit that is annually adjusted for inflation. With longer life expectancies, elderly Latinx will live more years in retirement and benefit from Social Security’s cost-of-living protections. Latinx tend to have higher life expectancies at age 65 than much of the population. Latino men who were age 65 in 2017 can expect to live to almost age 85, compared to almost age 83 for all men. Latina women who were age 65 in 2017 can expect to live to age 88, compared to age 86 for all women. As a result of their higher than average life expectancy, Latinx gain from the Social Security program’s annual cost-of-living adjustment.
The Need to Reinstate Racial and Ethnic Data Collections and Analysis
Until 2014, the Social Security Administration published date by race and ethnicity including the following:
- In 2014, 33% of Latinx received income from private assets, compared with more than 65% of whites.
- In 2014, 19% of Latinx 65 years old and over reported receiving income from private pensions or annuities, compared to 47% of whites 65 years old and older.
The Administration states it is conducting a thorough review of data sources for this information in order to ensure its accuracy. These data have proved invaluable to researchers, policy makers and advocacy groups. The National Committee urges the Social Security Administration to resume publication of these important data sets.
Government Relations and Policy Department, June 2020