Office of Retirement Policy

Retirement Security

 

Why is Social Security's work on retirement issues important?

Short, three-legged stool showing Social Security, pensions, and personal savings as the legs.

Retirement income used to fit the model of the three-legged stool—Social Security, a defined benefit pension from an employer, and a personal savings.

For better or worse, it is no longer that simple for a number of reasons:

  • The increasing reliance on defined-contribution pension plans shifts financial risks from employers to employees.
  • The increasing life spans and lower personal savings rates can lead to people outliving their personal retirement savings, putting them at risk at the end of their lives when they may most need the money to cover costly medical expenses and long-term care.
  • Despite longer lives, most workers continue to take their Social Security benefits at age 62 even though that may permanently reduce the monthly benefit. A 2007 survey found that only 19 percent of workers can correctly identify the age at which they will be eligible for unreduced benefits from Social Security.

Building a financially secure retirement has become much more complicated, especially with falling contributions from employers and lower rates of personal savings. Everyone, from workers and employers to researchers and policymakers, is trying to figure out what will replace the three-legged stool.

Workers can educate themselves about how to plan for retirement and when to claim Social Security benefits. That is why Social Security has developed a special initiative to encourage saving by improving financial literacy and education.

For policymakers and researchers, Social Security is studying ways to develop retirement security that addresses 21st century challenges. Keeping Social Security sound for future generations is at the heart of work on trust fund solvency and in the research that we support through the Retirement Research Consortium.