The Growing Socioeconomic Gap in Lifetime Social Security Retirement Benefits: Current and Future Retirees

Increasing socioeconomic disparities, including in life expectancy, have important implications for the U.S. Social Security program. This study examined inter- and intracohort trends in Social Security retirement benefits, paying special attention to how lifetime benefit trajectories by socioeconomic circumstance shift across cohorts encompassing current and future retirees.

Using a dynamic microsimulation model based on representative survey data linked to administrative records, we developed a set of cohort-specific projections that estimate monthly and lifetime Social Security retirement benefits for retirees spanning the early baby boom (1945-1954) to Generation X (1965-1974) cohorts.

We found a widening socioeconomic gap in projected monthly and lifetime benefits for men and women, especially on a lifetime basis. This divergence is associated with stagnation of benefit levels among lower socioeconomic status groups coupled with upward shifts among higher strata groups. Distributional changes are linked with increasing differential mortality, but other factors also likely play a role such as rising education premiums, growing earnings inequality, and changes in women's work and relationship histories.

Widening mortality differentials can lead to distributional changes in the U.S. Social Security program. Microsimulation methodology lends insights into how the socioeconomic gap in monthly and lifetime benefit distributions may change among future older Americans in the context of differential mortality and other demographic changes. Moving forward in time, these complex patterns could offset some of the progressivity built into the system.