SOCIAL SECURITY BENEFITS AS A RETIREMENT RESOURCE FOR U.S. NEAR‐RETIREES

This paper analyzes Social Security benefits as a retirement resource (wealth and income) for U.S. near‐retirees. We look at how the average values of several measures of benefits such as Social Security wealth and earnings replacement rates have changed from earlier cohorts to today's near‐retirement cohort, examine differences among demographic and socioeconomic groups within cohorts, and discuss reasons for these changes and differences. We use improved data (actual earnings history data) to produce more accurate measures of benefits. The paper also uses some new benefit measures. Three key findings are: (1) average real Social Security wealth increases markedly as we move to later cohorts primarily because of increases in average real lifetime earnings; (2) replacement rates fall as we move from the cohorts of persons reaching 61 in 1993–97 to later cohorts primarily because of the phase‐in of increases in the age of eligibility for full benefits and the increasing labor market activity of women; and (3) median Social Security wealth is much higher for women than for men because women live longer.