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Why Pensions are Important: Sources

  • The average monthly Social Security benefit paid to retired workers in 2018 is $1,469.52, or $17,634.24 a year.

    The average monthly Social Security benefit paid to widows & widowers is $1,393.76, or $16,725.12 per year.

    The average monthly Social Security benefit paid to disabled workers is $1,235.49, or $14,825.88 per year.

    (U.S. Social Security Administration, Office of Policy, "Monthly Statistical Snapshot, May 2019," Table 2.)
  • The federal minimum wage is $7.25 per hour. Assuming that there are 2080 work hours in a year (40 hours per week x 52 weeks per year), a worker making the federal minimum-wage would earn $15,080 in one year.

    (U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, "Compliance Assistance — Fair Labor Standards Act (FLSA).")

    Some states and local jurisdictions
    have their own minimum wage laws, which pay more. For example, the minimum wage in California is $10.50 per hour, or $21,850 a year. In the District of Columbia, it is currently $12.50 per hour, or $26,000 a year.
  • Social Security replaces 34.0 percent, of the amount that someone retiring at normal retirement age in 2019 (age 66) was earning before retirement.

    (Social Security Administration, Replacement Rates for Hypothetical Retired Workers, Table C, Page 8, April 2019)
  • Federal Reserve Board. “Changes in U.S. Family Finances from 2013 to 2016: Evidence from the Survey of Consumer Finances.” September 2014. Additional Information: 2016 SCF Chartbook, Median value of financial assets for families with holdings, Page 118.
  • In 2017, half of Americans age 65 and over who had income from financial assets received less than $1,754 a year in income from those assets.

    In 2015, 36 percent of Americans age 65 and over received no income at all from financial assets.  Of the Americans age 65 and over who receive income from financial assets, 74 percent receive less than $2,500 a year in income from those assets.

    (August 2018 Current Population Survey, PINC-08.)

    According to the Social Security Administration's Income of the Population 55 or Older, 2014, the median income from assets for "aged units" is $361 (Table 7.A3, "Percentage distribution of recipient units, by Social Security beneficiary status, marital status, and age, 2014"). An "aged unit" is defined as either a married couple living together in which at least one of the two is 65 or older or a nonmarried person 65 or older.
  • In 2017, half of all Americans age 65 and older received less than $24,224 in income from all sources.

    The median annual income for men 65 and older was $32,654; for women 65 and older, it was $19,180.
     
    The median yearly income for older households was $41,125. (Current Population Survey, August 2018)
     
    The median income of the four-fifths of people age 65 and older who are fully retired was $19,352.
     
    (Annual Social and Economic Supplement to Current Population Survey, August 2018.)
  • Median income of "aged units" with only Social Security is $15,871. Median income of "aged units" with Social Security and a private pension is $36,270. Median income of "aged units" with both Social Security and a federal government pension is $38,806. Median income of "aged units" with both Social Security and some other type of pension (state or local government, military) is $37,789.

    An "aged unit" is defined as either a married couple living together in which at least one of the two is 65 or older or a nonmarried person 65 or older.

    (Social Security Administration. "Number and median income of those receiving retirement benefits, by marital status and receipt of earnings and income from assets, 2014." “Income of the Population 55 or Older, 2014,” April 2016, Table 3.A5)
  • This figure includes public and private pensions, but does not include IRAs or Keoghs. In 2017, the median pension income for people age 65 and older was $14,948.

    (August 2018 Current Population Survey, PINC-08.)
  • This figure includes $9,808.2 trillion in private pension assets, $3,999.9 trillion in state and local government pension assets, and $8,888.2 trillion in federal government pension assets. 

    (Federal Reserve Board of Governors, Flow of Fund Accounts of the United States, Tables L.117-120, pp. 94-100 (pp. 110-113 of the PDF), September 20, 2018.)
  • The federal tax expenditure for pensions in 2019 is estimated to be $211 billion. This figure includes the revenue lost to the U.S. Treasury from employer contributions to both public and private pension plans. This is a combined total from defined benefit plans ($90.2B) and defined contribution plans ($120.8B). It does not include Individual Retirement Accounts and Keogh Plans, which are estimated to cost an additional $41 billion in foregone revenue. The total retirement plan tax expenditure is estimated at a total of $252 billion for 2019.

All taxpayers effectively pay for the tax subsidy to encourage retirement savings through higher taxes or fewer government services. The tax expenditure for deductions for health insurance premiums is $164.1 billion. The subsidy for mortgage interest deductions is expected to be $27.4 billion in 2019.

(Joint Committee on Taxation, U.S. Congress, Estimates of Federal Tax Expenditures for Fiscal Years 2018-2022, Table 1 - "Tax Expenditure Estimates by Budget Function, Fiscal Years 2018-2022," p. 31 (p. 33 of the PDF), October 4, 2018.)

  • According to the Office of Management and Budget, the federal tax expenditure for pensions in 2019 is estimated to be $147.15 billion. This is a combined total from defined benefit plans ($71.43 B) and defined contribution plans ($75.72 B). It does not include Individual Retirement Accounts and Keogh Plans, which are estimated to cost an additional $20.62 billion in foregone revenue. The total estimated retirement plan tax expenditures for 2019 is estimated at $167.7 billion.

    (Executive Office of the President, Office of Management and Budget, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2020, Table 16-2B "Estimates of Total Income Tax Expenditures for Fiscal Years 2018-2028, Page 192)
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