.. CENTER for

RETIREMENT
RESEARCH

at BOSTON COLLEGE

HOW CAN CHANGES TO SOCIAL SECURITY IMPROVE BENEFITS
FOR BLACK AND HISPANIC BENEFICIARIES?

Richard W. Johnson and Karen E. Smith

CRR WP 2023-22
December 2023

Center for Retirement Research at Boston College
Haley House
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617-552-1762 Fax: 617-552-0191
https://crr.bc.edu

Richard W. Johnson is the director of the program on retirement policy and a senior fellow at the
Urban Institute. Karen E. Smith is the codirector of the DYNASIM Microsimulation Model and
a senior fellow at the Urban Institute. The research reported herein was pursuant to a grant from
the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability
Research Consortium. The findings and conclusions expressed are solely those of the authors
and do not represent the views of SSA, any agency of the federal government, the Urban
Institute, or Boston College. The views expressed here do not necessarily reflect the views of the
United States Government nor any agency thereof, nor any of their employees, makes any
warranty, express or implied, or assumes any legal liability or responsibility for the accuracy,
completeness, or usefulness of the contents of this report. Reference herein to any specific
commercial product, process or service by trade name, trademark, manufacturer, or otherwise
does not necessarily constitute or imply endorsement, recommendation or favoring by the United
States Government or any agency thereof.

© 2023, Richard W. Johnson and Karen E. Smith. All rights reserved. Short sections of text, not

to exceed two paragraphs, may be quoted without explicit permission provided that full credit
including © notice, is given to the source.
About the Center for Retirement Research

The Center for Retirement Research at Boston College, part of a consortium that includes
parallel centers at the National Bureau of Economic Research, the University of Michigan, and
the University of Wisconsin-Madison, was established in 1998 through a grant from the Social
Security Administration. The Center's mission is to produce first-class research and forge a
strong link between the academic community and decision makers in the public and private
sectors around an issue of critical importance to the nation's future. To achieve this mission, the
Center conducts a wide variety of research projects, transmits new findings to a broad audience,
trains new scholars, and broadens access to valuable data sources.

Center for Retirement Research at Boston College
Haley House
140 Commonwealth Avenue
Chestnut Hill, MA 02467
phone: 617-552-1762 Fax: 617-552-0191
https://crr.bc.edu

Affiliated Institutions:

The Brookings Institution
Mathematica - Center for Studying Disability Policy
Syracuse University
Urban Institute
Abstract

This paper compares Social Security outcomes for non-Hispanic Black, Hispanic, and

non-Hispanic white beneficiaries and assesses the capacity of various benefit enhancements to

narrow racial and ethnic disparities in Social Security benefits. Using the Dynamic Simulation

of Income Model 4 (DYNASIM4), we project, under current law and each benefit enhancement,

lifetime Social Security benefits, the share of beneficiaries receiving limited annual benefits, and

the share with limited annual income. To capture the fully phased-in impact of each option, we

project annual outcomes in 2080 and lifetime outcomes for adults born between 2001 and 2010.

The paper found that:

Racial and ethnic differences in annual and lifetime Social Security benefits are
substantial. We project that average lifetime benefits received by adults born between
2001 and 2010 are 19 percent less for Black beneficiaries than white beneficiaries and
14 percent less for Hispanic beneficiaries than white beneficiaries. Black and Hispanic
beneficiaries ages 62 and older in 2080 are projected to be about 10 percentage points
more likely to receive limited incomes in 2080 than white beneficiaries.

Various benefit enhancements, including creating caregiver credits, making the benefit
formula more progressive, and adding a new minimum benefit to Social Security, would
disproportionately help Black and Hispanic beneficiaries.

However, these benefit enhancements would only modestly narrow racial and ethnic
disparities in Social Security benefits. Adding a new minimum benefit tied to years of
covered employment would have a particularly modest effect, because relatively few

beneficiaries receiving limited benefits complete long careers.

The policy implications of the findings are:

The effectiveness of benefit enhancements depends crucially on how those adjustments
are structured. Policy details, including eligibility for the enhanced benefit and the
presence of any benefit caps, shape how much low-income beneficiaries would receive
and how well targeted the adjustments are.

Achieving equity in Social Security benefits for Black and Hispanic adults would likely

require substantial progress toward equality in labor market outcomes.
Introduction

Despite the progressivity built into the Old Age, Survivors, and Disability Insurance
(OASDI) program, better known as Social Security, many beneficiaries receive limited benefits.
Program benefits depend largely on how much workers and their spouses earn over their lives
and contribute in payroll taxes. Consequently, workers who earn and contribute less because of
lower annual earnings or shorter careers receive less benefits when they retire or develop a
disability, even though the program replaces a higher share of earnings for workers with limited
lifetime earnings than for workers with more lifetime earnings (American Academy of Actuaries
2023). Moreover, groups with shorter life expectancies generally receive benefits for fewer
years than those with longer life expectancies, reducing their lifetime benefits. Social Security
accounts for more than half of the income received by the majority of adults ages 65 and older
(Dushi, Iams, and Trenkamp 2017). Yet, in December 2022 Social Security payments fell below
100 percent of the federal poverty level (FPL) for about a fifth of retired worker beneficiaries (or
more than 9.7 million people) and below 125 percent of the FPL for about a third of retired
worker beneficiaries (or about 16.2 million people).!

People of color face systemic racism that limits their employment opportunities and
earnings and suppresses their future Social Security benefits (Bertrand and Mullainathan 2004;
Daly, Hobijn, and Pedtke 2017; Darity and Mason 1998; Hamilton and Darity 2012; Penner
2008; Reid and Rubin 2005). Black workers also tend to have shorter careers than white
workers. Black workers' limited employment histories often result from health problems, driven
at least partly by racism, and caregiving responsibilities that interrupt employment and lead to
early retirement (Centers for Disease Control and Prevention 2013; Feagin and Bennefield 2014;
Fuller-Thomson et al. 2009; Kail, Taylor, and Rogers 2020; Murphy, Johnson, and Mermin
2007). Black and Hispanic people are especially likely to serve as primary caregivers for their
grandchildren, which can also interfere with paid work (Chen et al. 2014; Ellis and Simmons
2014; Minkler and Fuller-Thomson 2005). Additionally, Black people are less likely to marry
than white people (Johnson, Haaga, and Simms 2011), which limits their access to Social

Security's spouse and survivor benefits.

 

! Authors' calculations from Social Security Administration (2023, table 5B.6), based on the FPL for single adults
ages 65 and older.
Consequently, Black workers and other people of color tend to receive lower Social
Security benefits than white people when they retire or develop disabilities and collect Old Age
and Survivor Insurance (OASI) or Disability Insurance (DI) benefits (Godtland et al. 2007,
Martin and Murphy 2014; Social Security Administration 2016). Moreover, some policy choices
made early in the program's history, such as the decision to exclude such occupations as
domestic and agricultural workers, limited benefits for many Black people (Kijakazi, Smith, and
Runes 2019).

Lower Social Security benefits result in higher poverty rates at older ages for people of
color than for white people. At ages 65 and older, 22 percent of Black adults and 28 percent of
Hispanic adults had incomes below the FPL in 2016, compared with only 5 percent of white
adults (Johnson 2021). These disparities persist within educational and marital status groups.

Changing Social Security's benefit structure could offset some of the disadvantages that
Black and Hispanic workers face in the labor market and raise their retirement and disability
payments, promoting overall financial security for older adults and people with disabilities.
Adding a new minimum benefit to Social Security, for example, could lift all beneficiaries with
significant work histories out of poverty. Other options for raising Social Security payments to
low-income beneficiaries, who are disproportionately Black and Hispanic people, include
making the benefit formula more progressive so that it replaces a larger share of earnings for the
first dollars of lifetime earnings and a smaller share of earnings for later dollars, granting Social
Security credits to workers who take time out of the labor force to care for children or family
members with serious illness or disabilities, and adjusting how the program provides benefits to
survivors of deceased retired workers. Eliminating federal income taxes on Social Security
benefits would also boost after-tax benefits for some retirees and people with disabilities. Such
adjustments are consistent with the goals of Social Security, a social insurance program designed
to protect workers and their families in the event of low lifetime earnings, disability, widowhood,
extended longevity, and other life events.

In this study, we examine how various proposed enhancements to Social Security
benefits could promote financial security at older ages and reduce disparities in benefit payments
along racial and ethnic lines. The benefit enhancements we consider are similar to provisions
included in many prominent Social Security plans. Using dynamic microsimulation techniques,

we project, under current law and each option, lifetime Social Security benefits, the share of
beneficiaries receiving limited annual benefits, and the share with limited annual income. We
compare outcomes for Black, Hispanic, and white beneficiaries and compute the share of new
additional benefits that go to Black and Hispanic beneficiaries under each option. Because the
details of each proposed benefit adjustment shape its effectiveness, we model several iterations
of certain adjustments. We also compute the impact of each benefit enhancement on Social
Security's 75-year unfunded liability. Our analysis assumes that benefits scheduled under
current law and under each option will be paid in full, despite the program's long-term financing
shortfall. To capture the fully phased-in impact of each option, we project annual outcomes in
2080 and lifetime outcomes for adults born between 2001 and 2010.

Our projections reveal large disparities in the receipt of Social Security benefits. We
project that average lifetime benefits received by adults born between 2001 and 2010 are 19
percent less for Black beneficiaries than white beneficiaries and 14 percent less for Hispanic
beneficiaries than white beneficiaries. Black and Hispanic beneficiaries ages 62 and older in
2080 are projected to be about 10 percentage points more likely to receive only limited benefits
and limited incomes in 2080 than white beneficiaries. Although many of the benefit adjustments
we model would disproportionately help Black and Hispanic beneficiaries and narrow gaps in

Social Security benefits, none would come close to eliminating those disparities.

Modeled Benefit Enhancements

We model the potential impact of several proposals to enhance Social Security benefits.
These benefit enhancements, which are similar to ones that have been included in various
prominent Social Security plans, include making the benefit formula more progressive, adding a
new minimum benefit to Social Security, providing Social Security credits to people who spend
time caring for young children, improving survivor benefits, boosting benefits for long-term
beneficiaries, increasing benefit levels across the board, and eliminating federal income taxes on

Social Security benefits. Table 1 summarizes each provision, which we describe below.

Making the Benefit Formula More Progressive
Social Security benefits are computed based on a progressive benefit formula that
replaces a larger share of earnings for workers with limited lifetime earnings and a smaller share

for workers with higher lifetime earnings. The first step in computing benefits is to calculate
workers' average indexed monthly earnings (AIME), based on their highest 35-years of indexed
earnings, up to the taxable maximum each year. Workers' primary insurance amount (PIA), the
monthly amount they would receive if they begin collecting benefits at their full retirement age,
is a portion of their AIME. For workers turning 62 in 2024, the PIA equals 90 percent of their
first $1,174 of AIME, plus 32 percent of their AIME between $1,175 and $7,078 and 15 percent
of their AIME in excess of $7,078. Those thresholds, or bend points as Social Security calls
them, are indexed to changes in the national average wage.

We model the impact of making the benefit formula more progressive by raising the first
bend point and the first replacement rate and reducing the replacement rate for beneficiaries with
very high AIMEs. In 2024 this option, modeled after the Social Security benefit formula
adjustments proposed by the Bipartisan Policy Center (2016), would increase the first bend point
from $1,174 to $1,503, add a new bend point at $5,018, and keep the last bend point at $7,078.
The new replacement rates would be 95 percent before the first bend point (up from 90 percent),
32 percent between the first and second bend points, 15 percent between the second and third
bend points, and 5 percent above the third bend point.

Adding a New Minimum Benefit

Perhaps the most straightforward way of reducing poverty among Social Security
beneficiaries would be to add a new minimum benefit to the program that guaranteed
beneficiaries a monthly payment that covered basic living expenses, regardless of how much
they earned and contributed to the system.? We consider three alternative versions of a minimum
benefit. Option MB1, which is included in the Social Security 2100 Act introduced by Rep. John
Larson (D-CT) in 2023, would guarantee a benefit equal to 125 percent of the FPL to
beneficiaries with at least 30 years of covered employment who newly qualify for benefits in

2024.3 That minimum benefit would grow over time with the increase in the economy-wide

 

2 Social Security currently includes a special minimum benefit, but the minimum is too low to help many
beneficiaries. Of the 66 million people collecting Social Security payments in December 2022, only about 23,000
received the special minimum benefit (Social Security Administration 2023, tables 5.A1 and 5.A8). Feinstein
(2021) estimates that for workers who began collecting Social Security between 1999 and 2019, the only
beneficiaries collecting the special minimum benefit were those whose Social Security payments would otherwise
have been reduced by the program's windfall elimination provision, which cuts benefits for some people receiving a
pension based on employment that was not covered by Social Security.

3 Social Security 2100 Act, H.R. 4583, 118th Cong. (2023).
average wage. Because the FPL is tied to the growth in prices, which generally grow more
slowly than wages, the minimum benefit under this option would exceed 125 percent of the FPL
in future years for beneficiaries with long work histories. The minimum benefit would be
prorated for beneficiaries with shorter careers, providing a minimum equal to 6.25 percent of the
FPL for beneficiaries with 11 years of covered employment. The minimum would increase 6.25
percentage points with each additional employment year, up to 30 years of employment. This
option credits workers with a year of covered employment once they earn four quarters of
coverage as defined by Social Security, or a total of $6,560 in 2023.*

Option MB2, which was part of a recent Social Security plan developed by the
Republican Study Committee (2022) in the US House of Representatives, would provide a
minimum benefit equal to 40 percent of the average wage index (AWI) for beneficiaries with 40
years of covered employment. This minimum benefit would also be prorated, so that the
minimum would equal 15 percent of AWI for beneficiaries with 10 years of covered employment
and increase 0.833 percentage points with each additional employment year, up to 40 years of
employment. It uses a stricter definition of employment than option MBI, requiring workers to
receive more than $10,857 in 2017 wage-adjusted earnings, or more than $13,695 in 2023.°

Our third alternative minimum benefit, option MB3, would set the minimum at 100
percent of the FPL for all workers who completed 10 years of covered employment or received
DI benefits. This option uses the same employment definition as option MB1. Unlike the other
options, which would be available only to new beneficiaries beginning in 2025, option MB3
would be available to all beneficiaries beginning in 2025.

For most workers, option MB2 would provide a more generous minimum benefit than the
other options, but it requires about twice as much earnings to qualify for a year of coverage
(Figure 1). In 2022, the AWI was $63,795, so option MB2 would have provided an annual
minimum benefit of $25,518 for beneficiaries with at least 40 years of covered employment.
The FPL in 2022 for a single adult was $13,590, so option MB3 would have provided a $13,590
annual minimum benefit for beneficiaries who completed at least 10 years of covered

employment or received DI benefits, and option MB1 would have provided a $16,988 annual

 

4 For more information on covered quarters, see https://www.ssa.gov/oact/cola/QC.html.

3 This earnings threshold was specified in the Social Security Reform of 2016, on which the Republican Study Plan
was based. See Social Security Reform Act of 2016, H.R. 6489, 114th Cong. (2016).
minimum benefit for beneficiaries who completed at least 30 years of covered employment.
Option MB2 would guarantee a larger benefit than option MB1 for all workers and a larger
benefit than option MB3 for all workers with at least 18 years of covered employment. Option
MB3 would guarantee a larger benefit than option MB1 for workers with between 10 and 25
years of covered employment, and option MB1 would guarantee a larger benefit than option
MB3 for workers with more than 26 years of covered employment. The minimum benefit would
grow more slowly over time under option MB3, which is indexed to price growth, than under the
other options, which are indexed to wage growth, because prices generally grow more slowly

than wages.

Creating Caregiver Credits

Several Social Security plans would extend Social Security credits to workers who take
time out of the workforce to care for children, dependents with disabilities, or aged family
members. We model three options that would credit workers who provide 80 or more hours of
care in a month to young dependent children. Each option would base the credit on the AWI, not
a worker's own past earnings, so the credit would have a larger relative impact for low-wage
workers than high-wage workers. Option CC1 would provide a credit equal to 100 percent of the
AWI, credited each year that a caregiver provides at least 80 hours per month of care to a child
younger than age 6 or an older disabled dependent. This option is similar to a provision of the
Social Security plan proposed by Sen. Elizabeth Warren (D-MA) during the 2020 presidential
campaign (Smith, Johnson, and Favreault 2020a). Option CC2, which Sen. Amy Klobuchar (D-
MN) proposed during the 2020 presidential campaign (Smith, Johnson, and Favreault 2020a), is
the same as CC1, but limits the credit to half of the AWL. Our third caregiver credit alternative,
option CC3, would credit caregivers of children younger than age 13 with earnings equal to half
the AWI, but it would reduce that credit by 50 cents for every $1 earned. Thus, the credit would
phase out as a caregiver earns more and would disappear once earnings equal or exceed the
AWTI. President Biden included this provision in the Social Security plan he released during the
2020 presidential campaign (Smith, Johnson, and Favreault 2020b). Neither option CC1 nor
option CC2 would cap the number of caregiver years, but CC3 would limit the credit to five

caregiving years.
Caregiver credits could significantly boost Social Security benefits for women, who
shoulder most caregiving responsibilities (Parker 2015; Schulz and Eden 2016). Women earn
lower Social Security benefits than men because they earn lower hourly wages and work fewer
hours, often because of caregiving responsibilities (Cosic, Johnson, and Smith 2018; Favreault
2018; Johnson, Smith, and Butrica 2023). Providing help directly to caregivers, rather than
helping them indirectly through spousal benefits, would benefit single mothers, who are
disproportionately low-income women of color (Livingston 2018). However, people who cannot
afford to leave the workforce or reduce their paid work hours might benefit less from the

proposal than other women, depending on how the caregiver credit is specified.

Improving Survivor Benefits

In addition to providing retired worker benefits, Social Security provides benefits to some
spouses of retired workers and some survivors of deceased beneficiaries. Instead of collecting
benefits based on their own earnings and contributions record, age-eligible adults can elect to
receive monthly benefits equal to 50 percent of their spouse's PIA, and widows and widowers
can elect to receive benefits equal to 100 percent of their deceased spouse's benefit. Spouse and
survivor benefits are available to divorced spouses if their marriage lasted at least 10 years. In
2022, survivor benefits accounted for about 9 percent of all OASI benefits.6

After a retired worker's death, family Social Security benefits can fall to between 50 and
67 percent of the benefits received before the death. We model two versions of a proposal that
would increase survivor benefits. The first version, option SB1, would set the survivor benefit
equal to 75 percent of the combined Social Security benefit that the two spouses received when
they were both alive. Option SB2, which was included in Sen. Warren's 2020 Social Security
plan (Smith, Johnson, and Favreault 2020a), is identical to option A except that it would cap the
new survivor benefit option at the PIA for beneficiaries with average career earnings. Upon the
death of a spouse, then, option SB2 would allow Social Security beneficiaries to collect a
monthly benefit based solely on their own earnings, top up the monthly benefit based on their
own earnings so that it equaled 100 percent of their spouse's benefit, or receive a benefit equal to
the minimum of (1) 75 percent of the combined Social Security benefit received by the couple

before the spouse's death and (2) the PIA for a worker with average career earnings.

 

6 Authors' calculations from Social Security Administration (2023, table 5.A1).
Increasing survivor benefits in this way could help reduce the poverty rate for older
widows, which is more than three times as high as the rate for older married women (Social
Security Administration 2016). However, boosting survivor benefits could exacerbate inequities
by race, lifetime earnings, and education (Favreault and Mermin 2008; Harrington Meyer, Wolf,
and Himes 2004). Black and Hispanic people, for example, are less likely to marry and more

likely to divorce than non-Hispanic white people.

Adding a Longevity Bonus

Another option we model would provide additional help to long-term beneficiaries. After
16 years of benefit receipt, it would boost benefits by 1 percent of the PIA for a hypothetical
worker with average career earnings who claimed benefits in the same year and provide an
additional 1 percent bonus for each additional year of collection until the benefit bump-up
reaches 5 percent of the average PIA. Payments would then remain at that level, plus annual
cost-of-living adjustments. This provision was included in President Biden's 2020 Social
Security plan (Smith, Johnson, and Favreault 2020b).

Many long-term Social Security beneficiaries receive relatively low payments because
their benefits are based on earnings received many years earlier. The program's cost-of-living
adjustments raise payments to offset inflation, but because wages typically grow faster than
prices, beneficiaries who began collecting more recently generally receive larger benefits than
those who began collecting earlier. Moreover, out-of-pocket spending on medical care and home
and residential care typically surges after age 80 (Cubanski et al. 2019; Hatfield et al. 2018),
exacerbating economic hardship for many long-term beneficiaries. However, a benefit bump-up
for long-term beneficiaries may not go to the most vulnerable beneficiaries, because those who
survive to older ages tend to have more lifetime earnings than those who die at relatively young

ages (Bosley, Morris, and Glenn 2018; Chetty et al. 2016; Waldron 2007).

Increasing Benefit Levels Across the Board
Another way to improve the financial security of Social Security beneficiaries would be
to provide higher benefits to all beneficiaries. We model an across-the-board benefit increase by

increasing the first bend point in the benefit formula by 22 percent (from $1,174 to $1,432 in
2024) and increasing the first replacement rate in the benefit formula from 90 to 95 percent. A

drawback of this option is that it would not target the neediest beneficiaries.

Eliminating Federal Income Taxes on Social Security Benefits

Since 1984, beneficiaries with modified adjusted gross income (MAGTI) above $25,000 if
single or $32,000 if married have paid federal income taxes on some of their Social Security
benefits. The Internal Revenue Service defines modified adjusted gross income as adjusted gross
income plus nontaxable interest income and half of their Social Security benefits. People filing
income taxes as individuals must pay income tax on 50 percent of their Social Security benefits
if their MAGI is between $25,000 and $34,000, and on 85 percent of their benefits if their MAGI
exceeds $34,000. People filing joint returns must pay income taxes on 50 percent of their Social
Security benefits if their MAGI is between $32,000 and $44,000, and on 85 percent of their
benefits if their MAGI exceeds $44,000. Taxing a portion of Social Security treats those benefits
the same way as private pension benefits by requiring beneficiaries to pay taxes on employer
payroll contributions that they did not have to declare as income for tax purposes when they were
working. Those tax thresholds do not adjust with inflation or earnings growth, so the share of
beneficiaries subject to income taxes has been growing over time.

The final benefit adjustment we model is the elimination of federal income taxes on
Social Security benefits, which would leave beneficiaries with more resources to cover living
expenses. A similar provision was included in the 2016 Social Security Reform Act. We
assume that beneficiaries would no longer pay federal income tax on any of their Social Security
benefits beginning in 2025, whereas the Social Security Reform Act would gradually eliminate

income taxes on benefits over several decades.

Methods

We use dynamic simulation techniques to model future Social Security outcomes under
current law and various Social Security benefit enhancements. We assume that benefit
adjustments take effect in 2025, except where otherwise noted in Table 1, but most of the
changes would affect only new beneficiaries, so the full impact would not be felt until decades
later. Only enhanced survivor benefits, the longevity bonus, the elimination of income taxes, and

one of the minimum benefit options (MB3) would affect people who claim benefits before 2025.
Phase-ins that limit changes to new beneficiaries affect increasing numbers of beneficiaries over
time. Caregiver credits, which primarily accrue at relatively young ages, would not raise Social
Security benefits much until several decades after they first become available. We show
outcomes in inflation-adjusted 2022 dollars.

Because most of the benefit enhancements we model take decades to phase in fully, we
project outcomes far into the future. For Social Security beneficiaries ages 62 and older in 2080,
we project mean annual benefits, the share with limited annual benefits-defined alternatively as
less than 100 percent of the FPL and less than 125 percent of the FPL-and the share with
limited income-defined as having annual adjusted family income less than 25 percent of the
AWI. This relative income measure shows whether beneficiaries' incomes are keeping pace
with workers' incomes. We define adjusted family income as income from earnings;
partnerships and S-corporations; Social Security, Supplemental Security Income (SSI), and other
government benefits; defined benefit pensions from employers; interest, dividends, and rents;
capital gains; and retirement account withdrawals; less federal income tax, state income tax,
payroll tax, and Medicare premiums. We also project lifetime Social Security benefits and
contributions for adults born between 2001 and 2010 who survive to age 25, summing their
price-adjusted benefits and contributions each year and discounting to age 65.7 Social Security
contributions include payments made by employees and their employers. Our analysis excludes
undocumented immigrants. We report Social Security benefits net of any federal income taxes
paid on those benefits.

For current law-our baseline scenario-and each option, we compare outcomes for non-
Hispanic Black, Hispanic, and non-Hispanic white beneficiaries.® For simplicity, throughout the
report we refer to non-Hispanic Black people and non-Hispanic white people as Black people
and white people, respectively. We focus on lifetime Social Security benefits rather than annual
benefits because differences across groups in lifetime benefits reflect differences in benefit
claiming ages and mortality as well as differences in annual benefit amounts. To see how well

the benefit adjustments target beneficiaries of color, we compute the share of new benefits

 

7 Following the 2023 intermediate assumptions adopted by the Social Security trustees, we discount future Social
Security benefits and contributions at an annual real rate of 2.3 percent (Board of Trustees, Federal Old-Age and
Survivors Insurance and the Federal Disability Insurance Trust Funds 2023).

8 We do not have enough Asians or beneficiaries from other ethnic groups in our sample to show outcomes for other
groups.

10
generated by each option that would go to Black and Hispanic beneficiaries. Our analysis
includes retirement, disability, spouse, and survivor benefits.

Our projections assume that benefits scheduled under current law and each option are
paid in full, even though Social Security faces a long-term financial shortfall. Because the
benefit adjustments we model vary widely in cost, we compute how each option would increase
Social Security's 75-year unfunded liability, measured in 2025. The 75-year unfunded liability is
defined as the present value of Social Security costs between 2025 and 2100, minus the sum of
the assets in the Social Security trust fund in 2025 and the present value of Social Security
revenues between 2025 and 2100.

Dynamic Simulation of Income Model 4

Our projections of Social Security outcomes under current law and various benefit
adjustments is based on the Urban Institute's Dynamic Simulation of Income Model 4
(DYNASIM4). The model starts with a nationally representative sample of individuals and
families in 2006 and ages them year by year, simulating key demographic, economic, and health
events. For example, DYNASIM4 projects that each year some people in the sample get
married, have a child, or find a job. The model projects that other people become divorced or
widowed, stop working, begin collecting Social Security, become disabled, or die. These
transitions are based on probabilities generated by carefully calibrated equations estimated from
national household survey data. The equations account for important differences in how likely
various experiences are depending on gender, education, earnings, and other characteristics.
Other equations in DYNASIM4 project annual earnings, savings, and home equity. The model
includes detailed Social Security, SSI, health insurance, and income tax calculators that combine
historical and projected program rules with projections of lifetime earnings, disability and health
status, and household income and wealth.

The baseline model projects current-law program rules into the future, including the
sunset of tax provisions in the 2017 Tax Cut and Jobs Act. We also assume that current indexing
of income tax parameters and government benefits continue indefinitely. For consistency with
Social Security's projections about program revenues and payments, we generally use the same
assumptions that the Medicare and Social Security trustees used in their 2023 projections

(Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance

11
Trust Funds 2023; Board of Trustees, Federal Old-Age and Survivors Insurance and the Federal
Disability Insurance Trust Funds 2023).

DYNASIM4 has been rigorously validated, and its projections align closely with those
developed by the Social Security actuaries (Smith et al. 2018). One area in which we deviate
from the actuaries, however, is our projection of revenues generated by the income taxation of
Social Security benefits. Because we assume that current law continues indefinitely, we hold the
income thresholds for the taxation of Social Security benefits, which have not changed since they
first went into effect in 1984, at their current levels throughout the projection period.
Consequently, we project that revenue from taxing Social Security benefits increases as inflation
and productivity growth raises earnings. Our projections show that between 2027 and 2095, this
revenue as a share of total benefits paid will grow from 5 percent to 8.5 percent. By contrast, the
Social Security actuaries project that income tax collections as a share of benefits paid will
increase over the same period from 5 percent to 5.6 percent (Social Security Administration
2019).

Urban Institute researchers have used DYNASIM4 extensively to evaluate programs and
policies affecting older adults, including Social Security, Medicare, long-term services and
supports, and employer-provided pensions, and the potential impact of reforms. Studies have
examined Social Security and pension reform proposals from the Bipartisan Policy Center's
Commission on Retirement Security and Personal Savings (Bipartisan Policy Center 2016), the
National Commission on Fiscal Responsibility and Reform (Favreault and Karamcheva 2011),

and the 2020 Democratic presidential candidates (Smith, Johnson, and Favreault 2020a).°

Racial and Ethnic Differences in Social Security Benefits under Current Law

We project that under current law, 2080 mean annual Social Security benefits for
beneficiaries ages 62 and older, expressed in 2022 inflation-adjusted dollars, are $28,700 for
Black beneficiaries, $28,900 for Hispanic beneficiaries, and $34,000 for white beneficiaries
(Table 2). Compared with white beneficiaries, projected mean annual benefits are 16 percent

less for Black beneficiaries and 15 percent less for Hispanic beneficiaries. Of all benefits paid to

 

9 More information about DYNASIM4, including documentation, reports, and interactive validation tools, is
available at https://www.urban.org/policy-centers/cross-center-initiatives/program-retirement-
policy/projects/dynasim-projecting-older-americans-future-well-being.

12
adults ages 62 and older in 2080, 11 percent will go to Black beneficiaries and 22 percent will go
to Hispanic beneficiaries, less than their share of the older population. We project that Black
adults will account for 12 percent of Social Security beneficiaries ages 62 and older in 2080, and
Hispanic adults will account for 25 percent (results not shown in the table).

Racial and ethnic disparities are similar when we compare the lifetime value of Social
Security benefits for adults born between 2001 and 2010 who survive to age 25. The mean
lifetime value of benefits for white adults is $621,600. By comparison, the mean lifetime value
of benefits is $503,200 for Black adults, 19 percent less than for white adults, and $531,900 for
Hispanic adults, 14 percent less than for white adults. We project that over a lifetime 11 percent
of all Social Security benefits received by adults born between 2001 and 2010 will go to Black
beneficiaries and 23 percent will go to Hispanic beneficiaries, less than their share of the
beneficiary population.

Projected lifetime Social Security contributions for adults born between 2001 and 2010
who survive to age 25 are much lower for Black and Hispanic adults than for white adults. We
project that compared with white adults, lifetime Social Security contributions are 30 percent less
for Black adults and 26 percent less for Hispanic adults. Over a lifetime, mean Social Security
benefits exceed contributions by $15,500 (in 2022 inflation-adjusted dollars) for Black adults
and $17,100 for Hispanic adults. For white adults, however, mean lifetime benefits fall short of
lifetime contributions by $77,000. The median ratio of lifetime benefits to lifetime contributions
is 1.06 for Black adults, 1.08 for Hispanic adults, and 0.91 for white adults (results not shown in
the table). Because the Social Security benefit formula is progressive, lower-earning Black and
Hispanic beneficiaries receive higher benefits relative to their contributions than higher-earning
beneficiaries.!?

Under current benefit rules, we project that Black and Hispanic beneficiaries ages 62 and
older are much more likely than white beneficiaries to receive only limited Social Security
benefits and limited income (Table 3). The projected share of 2080 beneficiaries receiving
benefits less than 125 percent of the FPL is 18.4 percent for Black beneficiaries, 18.0 percent for

Hispanic beneficiaries, and 8.4 percent for white beneficiaries, while the projected share

 

10 Although expected lifetime Social Security contributions exceed expected lifetime benefits for white adults, they
benefit from the insurance aspects of Social Security, which provides financial protection to people who develop
disabilities, end up earning relatively little, or live especially long (Arapakis and Wettstein 2023).

13
receiving benefits less than 100 percent of the FPL is 10.0 percent for Black beneficiaries, 9.9
percent for Hispanic beneficiaries, and 4.3 percent for white beneficiaries. The projected share
of beneficiaries receiving benefits below the FPL is lower in 2080 than today because initial
Social Security benefits increase over time with the average growth in wages while the FPL
increases over time with the growth in prices, and we assume, consistent with long-term trends
and the Social Security actuaries' assumptions (Board of Trustees, Federal Old-Age and
Survivors Insurance and the Federal Disability Insurance Trust Funds 2023), that wages will
grow faster than prices.

Black and Hispanic beneficiaries are about 10 percentage points more likely than white
beneficiaries to receive limited income in our baseline scenario. Our baseline projections show
that in 2080 26.4 percent of Black beneficiaries ages 62 and older and 25.5 percent of Hispanic
beneficiaries will have annual adjusted income below 25 percent of the AWI, compared with

15.5 percent of white beneficiaries.

Projected Impact of Benefit Enhancements on Social Security Benefits

Of the benefit enhancements we model, eliminating federal income taxes on benefits
would have the largest impact on lifetime Social Security benefits net of income taxes paid on
those benefits, raising projected mean lifetime benefits for adults born between 2001 and 2010
by $84,400 (in 2022 inflation-adjusted dollars), a 14.4 percent increase (Table 4). An across-the-
board benefit increase would also have a substantial impact, raising mean lifetime benefits by
$47,100 or 8.0 percent. Other benefit enhancements would have modest effects. Providing a
caregiver credit equal to 100 percent of the AWI for people who care for children younger than
age 6 (option CC1) would increase mean lifetime benefits by $21,400 or 3.6 percent, and setting
survivor benefits equal to 75 percent of the benefit received by both spouses when both were
alive, without a cap (option SB1), would increase mean lifetime benefits by $25,600 or 4.4
percent. Capping the survivor benefit at the Social Security benefit received by a worker with
average career earnings (option SB2) would nearly eliminate the impact of the survivor benefit
enhancement, increasing overall lifetime benefits by only 0.2 percent.

The other benefit enhancements we model would increase mean lifetime benefits by less
than 3 percent. The most generous minimum benefit we consider (option MB2), which would

guarantee a benefit equal to 40 percent of the AWI for beneficiaries who completed 40 or more

14
years of covered employment, would increase mean lifetime benefits by 2.3 percent. A
minimum benefit equal to 125 percent of the FPL for beneficiaries who completed 30 or more
years of covered employment (option MB1) would increase mean lifetime benefits by less than 1
percent. Adding these new minimum benefits to Social Security would have only a limited
impact because relatively few people with limited benefits work long enough to qualify for a
significant minimum benefit. Among Social Security beneficiaries ages 62 and older in 2022
whose Social Security benefits fall below 125 percent of the FPL, only 46 percent had completed
30 years of covered employment and only 19 percent had completed 40 years, according to our
DYNASIM4 projections. Guaranteeing a benefit equal to 100 percent of the FPL to all
beneficiaries who completed 10 or more years of covered employment or ever collected DI
benefits (option MB3) would increase lifetime benefits by only 0.4 percent because it would not
increase benefits much for those people who qualify (although it would guarantee at least a
poverty-level benefit for all retired and disabled beneficiaries who qualify). Making the benefit
formula more progressive would only slightly affect overall benefits because that change would
reduce payments to people who receive large baseline benefits. Similarly, adding a longevity
bonus to Social Security and providing a caregiver credit equal to no more than 50 percent of the
AWI would not affect overall lifetime benefits much.

Most of the options we model would increase mean lifetime benefits more for Black and
Hispanic beneficiaries than for white beneficiaries (Table 5). Among adults born between 2001
and 2010, making the benefit formula more progressive would increase mean lifetime benefits
$23,800 for Black beneficiaries and $20,500 for Hispanic beneficiaries, compared with only
$800 for white beneficiaries. In relative terms, a more progressive benefit formula would
increase mean lifetime benefits 4.7 percent for Black beneficiaries, 3.8 percent for Hispanic
beneficiaries, and 0.1 percent for white beneficiaries. Black and Hispanic beneficiaries would
receive a disproportionate share of the additional benefits created by a more progressive benefit
formula. Of the new benefits generated by a more progressive benefit formula, 36 percent would
go to Black beneficiaries and 60 percent would go to Hispanic beneficiaries. By contrast, we
project that under current law Black beneficiaries will receive only 11 percent of all lifetime
benefits paid to adults born between 2001 and 2010, and Hispanic beneficiaries will receive only
23 percent. Black and Hispanic beneficiaries would gain from the new benefit formula because

they are more likely than white beneficiaries to have limited lifetime earnings. A more

15
progressive benefit formula would reduce lifetime benefits for a disproportionate share of white
beneficiaries.

Creating caregiver credits and adding a new minimum benefit to Social Security would
also help Black and Hispanic beneficiaries. Hispanic adults would especially benefit from
caregiver credits because they generally have more children than Black and white adults. A
caregiver credit equal to 100 percent of the AWI would increase mean lifetime Social Security
benefits $33,800 (or 6.4 percent) for Hispanic adults, compared with $21,100 for Black adults
and $16,100 for white adults. Adding a new minimum benefit would disproportionately help
Black adults. The minimum benefit that provides 40 percent of AWI after 40 years of work
(option MB2) increases mean lifetime Social Security benefits for Black adults by $17,900 (or
3.6 percent). This is a bigger increase than for Hispanic (2.7 percent) and white (2.1 percent)
adults because Black workers tend to work longer at lower wages than other workers, and they
gain more from this reform than the other minimum benefit options.

None of the modeled options, however, would come close to eliminating the racial and
ethnic gap in Social Security benefits (Table 6). Making the benefit formula more progressive
would have the biggest impact, narrowing the mean lifetime benefit gap between Black and
white beneficiaries by $23,000 and narrowing the gap between Hispanic and white beneficiaries
by $19,700. However, those gains would close only 19 percent of the benefit gap between Black
and white beneficiaries and 22 percent of the benefit gap between Hispanic and white
beneficiaries.

A few options we model would widen the benefit gap, increasing mean lifetime benefits
more for white beneficiaries than for Black and Hispanic beneficiaries. Eliminating federal
income taxes on Social Security benefits would disproportionately help white beneficiaries most,
widening their advantage in mean lifetime benefits by $38,000 over Black beneficiaries and
$33,000 over Hispanic beneficiaries. White beneficiaries would especially gain from the tax
break because under current law they generally pay more income tax on their Social Security
benefits than Black and Hispanic beneficiaries, given their relatively high benefits and the
progressivity of the income tax. Increasing Social Security benefits across the board and
creating an uncapped monthly survivor benefit equal to 75 percent of the monthly benefit
received by the household when both spouses were alive would also favor white beneficiaries,

who are more likely to have been married to a high-earning spouse than Black and Hispanic

16
beneficiaries. Boosting benefits for beneficiaries who have been collecting payments for at least
15 years would increase mean lifetime benefits less for Black beneficiaries than for others
because Black adults' high mortality rates reduce the chance that they will collect benefits long
enough to qualify for the longevity bonus.

The detailed specifications about how each option would boost benefits and who would
qualify shape each option's capacity to narrow racial and ethnic gaps in Social Security benefits.
Although raising survivor benefits would disproportionately help better-off white beneficiaries if
the benefits were not capped, the survivor benefit enhancement would slightly favor Black
beneficiaries if the benefit could not exceed the payment received by workers with average
career earnings. The details surrounding a caregiver credit determine how much it would help
Hispanic workers, who generally have more children and earn less than white workers. When
the credit replaces up to 100 percent of average wages (option CC1), the credit closes 19.7
percent of the racial gap for Hispanic beneficiaries, but only 4.2 percent of the gap for Black
beneficiaries. A new minimum benefit would reduce the racial gap in lifetime benefits more for
Black beneficiaries if the minimum increased with additional employment years up to 40 years

(MB2) than if the minimum peaked at 10 or 30 years of employment.

Projected Impact of Benefit Adjustments on the Prevalence of Limited Benefits

Adding a caregiver credit to Social Security, increasing Social Security benefits across
the board, making the benefit formula more progressive, and eliminating federal taxes on Social
Security benefits would reduce significantly the number of Social Security beneficiaries
receiving limited annual benefits (Table 7). A caregiver credit equal to 100 percent of the AWI
(option CC1) would reduce the projected share of beneficiaries ages 62 and older in 2080
receiving benefits below 125 percent of the FPL by 3.4 percentage points, cutting the number of
beneficiaries with benefits below that level by 27 percent. The projected share of beneficiaries
with benefits below 125 percent of the FPL would fall 3.1 percentage points if benefits were
increased across the board and 2.8 percentage points if the benefit formula became more
progressive. Because we assume that the income thresholds that determine whether Social
Security benefits are taxable remain fixed at its current nominal level, as now specified by law,
our baseline projections indicate that nearly all beneficiaries will pay some federal income tax on

their Social Security benefits in 2080. Eliminating the tax on benefits would reduce the share

17
receiving only limited benefits, measured on an after-tax basis, by 2.7 percentage points.
Adjusting survivor benefits, creating a longevity bonus, and adding a new minimum benefit to
Social Security would have smaller effects on the receipt of limited benefits.

Because Black and Hispanic beneficiaries are more likely than white beneficiaries to
receive limited Social Security benefits under current law, most of the benefit enhancements we
model would reduce the share with limited benefits more for Black and Hispanic beneficiaries
than for white beneficiaries. The most generous caregiver credit-option CC1-would reduce
the share receiving annual benefits below 125 percent of the FPL by 6.4 percentage points for
Hispanic beneficiaries, 4.0 percentage points for Black beneficiaries, and 2.1 percentage points
for white beneficiaries. Making the benefit formula more progressive would reduce the share
receiving limited Social Security benefits by 5.0 percentage points for Black beneficiaries, 3.6
percentage points for Hispanic beneficiaries, and 1.7 percentage points for white beneficiaries.
Increasing benefits across the board and eliminating federal income taxes on Social Security
benefits would also reduce the share receiving limited benefits more for Black and Hispanic
beneficiaries than for white beneficiaries.

However, only a few benefit enhancements would generate a significantly larger percent
reduction in the number of beneficiaries with limited benefits for Black and Hispanic
beneficiaries than for white beneficiaries. Making the benefit formula more progressive would
reduce the number with limited benefits by 27 percent for Black beneficiaries, 20 percent for
Hispanic beneficiaries, and 20 percent for white beneficiaries. The most generous caregiver
credit-option CC1-would shrink the number with limited benefits by 36 percent for Hispanic
beneficiaries, compared with 22 percent for Black beneficiaries and 25 percent for white
beneficiaries. Increasing Social Security benefits across the board would reduce the number of
beneficiaries with limited benefits more for Black beneficiaries (28 percent) than for Hispanic
(23 percent) and white beneficiaries (26 percent). Eliminating federal incomes taxes on Social
Security benefits would generate a larger percent reduction in the number with limited benefits
for white beneficiaries than for Black or Hispanic beneficiaries.

Adding a new minimum benefit to Social Security would have relatively modest effects
on the share and number with limited benefits, because relatively few people with limited
benefits have employment histories long enough to qualify for a significant minimum. Minimum

benefit option MB1, which guarantees beneficiaries with at least 30 years of covered

18
employment a benefit equal to 125 percent of the FPL, would reduce the share receiving benefits
below that level by 3.0 percentage points for Black beneficiaries, 2.1 percentage points for
Hispanic beneficiaries, and 1.2 percentage points for white beneficiaries. Minimum benefit
option MB3, which would guarantee beneficiaries with at least 10 years of covered employment
a benefit equal to 100 percent of the FPL, would not reduce the share with benefits below 125
percent of the FPL because this option would lift benefits only up to the FPL. Creating a
longevity bonus and adjusting survivor benefits would not reduce the prevalence of limited
Social Security benefits much for any of the three groups because of the relatively small size of
the target population and the relatively limited number of lower-income beneficiaries who
survive long enough to benefit from these reforms.

The projected impacts of the modeled benefit enhancements are similar when we define
limited benefits as annual payments that fall below 100 percent of the FPL (Table 8). The
projected percentage point reductions in the share of beneficiaries with limited benefits are
somewhat lower in Table 8 than Table 7 because fewer beneficiaries receive baseline benefits
that fall below 100 percent of the FPL than 125 percent of the FPL. However, projected percent
reductions in the number of beneficiaries with limited benefits generally do not differ much
between the two alternative definitions of limited benefits. One notable difference between the
tables is that minimum benefit option MB3, which would guarantee a benefit equal to 100
percent of the FPL to all beneficiaries who completed at least 10 years of covered employment or
ever received DI, would significantly reduce the prevalence of benefits that falls below 100
percent of the FPL. That option reduces the share of beneficiaries receiving benefits below 100
percent of the FPL by 4.4 percentage points for Black beneficiaries and 3.8 percentage points for
Hispanic beneficiaries, shrinking the number of people receiving benefits below that level by 44
percent for Black beneficiaries, 38 percent for Hispanic beneficiaries, and 26 percent for white
beneficiaries. Beneficiaries who continue to receive a sub-poverty benefit under option MB3 fail

to meet the 10-years-of-work rule.

Projected Impact of Benefit Adjustments on the Prevalence of Limited Income
The benefit enhancements we consider would have smaller projected effects on the share
and number of beneficiaries with limited incomes than with limited benefits (Table 9). An

across-the-board benefit increase would have the largest impact, reducing the share with adjusted

19
family incomes below 25 percent of the AWI by 2.6 percentage points, thus cutting the number
of beneficiaries with limited income by 14 percent. Making the benefit formula more
progressive would reduce the share with limited income by 2.5 percentage points, setting
survivor benefits equal to 75 percent of the household's benefit level without a cap would reduce
the share by 1.7 percentage points, and creating a caregiver credit equal to 100 percent of the
AWI would reduce the share by 1.4 percentage points. None of the other benefit enhancements
we model would reduce the projected share of beneficiaries with limited income by as much as 1
percentage point. The projected impacts would not vary much by race and ethnicity. Making the
benefit formula more progressive, for example, would reduce the share with limited incomes by
2.8 percent for Black and Hispanic beneficiaries and 2.3 percent for white beneficiaries. The
smaller impact of benefit enhancements on adjusted income than benefits reflects the progressive
effects of income taxation and Medicare premium subsidies available to low-income
beneficiaries. Some of the increase in Social Security benefits would be offset by higher taxes

and Medicare premiums.

Projected Cost of Proposed Benefit Enhancements

The proposed benefit enhancements we consider vary widely in cost. Providing an
across-the-board benefit increase and eliminating the federal income tax on Social Security
benefits are the costliest options we model, each increasing Social Security's 75-year unfunded
liability, measured in 2025 when we assume the changes would go into effect, by 30 percent
(Figure 2). The uncapped survivor benefit option (SB1) would increase the 75-year unfunded
liability by 24 percent. None of the other options would increase unfunded liabilities by more
than 11 percent.

The costs of adding a new minimum benefit and providing caregiving credits vary
depending on how those options are specified. The minimum benefit option MB1, which would
guarantee beneficiaries with long careers a benefit equal to 125 percent of the FPL, would
increase the program's unfunded liabilities by only 2 percent. Option MB2, which would
guarantee a larger benefit to beneficiaries with long careers, and option MB3, which would
provide a benefit equal to 100 percent of the FPL to all beneficiaries who completed as few as 10
years of covered employment or ever received DI, would each increase unfunded liabilities by 7

percent. Providing caregiver credits equal to 100 percent of the AWI (option CC1) would

20
increase unfunded liabilities by 11 percent, whereas providing credits equal to no more than 50
percent of the AWI (options CC2 and CC3) would increase unfunded liabilities by 5 percent.
Increasing survivor benefits but capping them at the benefit received by a worker with
average career earnings is the least costly option we model. It would increase the program's
unfunded liabilities measured in 2025 by only 1 percent, only about 4 percent as much as the
uncapped survivor benefit option. Making the benefit formula more progressive and adding a
longevity bonus would each increase Social Security's unfunded liabilities by 6 percent.
Projected cost differences between the various options largely reflect differences in their
projected impact on lifetime benefits paid to beneficiaries born between 2001 and 2010, as
reported in Table 4. However, they also reflect differences across options in implementation and
how benefit impacts evolve over time. Eliminating income taxes and providing an uncapped
spousal benefit enhancement are especially costly because they would take effect immediately.
By contrast, the options to add a new minimum benefit and caregiver credits to Social Security,
make the benefit formula more progressive, and provide an across-the-board benefit increase
would apply only to new beneficiaries, so their costs would not register for decades. The impact
of the income tax repeal grows over time because the income threshold for the taxation of
benefits is not indexed. Nominal wage growth substantially increases average Social Security
benefits over the coming decades, leaving nearly all benefits subject to federal income taxes by

2080 under current law.

Conclusions

Black and Hispanic adults receive much lower annual and lifetime Social Security
benefits than white adults. Our projections indicate that average lifetime benefits paid to adults
born between 2001 and 2010 will be 19 percent less for Black adults than white adults and 14
percent less for Hispanic adults than for white adults. In 2080, 18.4 percent of Black
beneficiaries and 18.0 percent of Hispanic beneficiaries are projected to receive annual benefits
that fall below 125 percent of the FPL, compared with only 8.4 percent of white beneficiaries.

Various benefit enhancements could reduce these racial and ethnic gaps in Social
Security benefits, but none of the options we consider would come close to eliminating the gaps,
and some adjustments would increase them. Making the benefit formula more progressive

would narrow Social Security disparities more than the other options we consider. Black and

21
Hispanic beneficiaries would disproportionately gain from a change in the benefit formula that
raised the share of the first dollars of lifetime earnings that Social Security replaces during
retirement or disability and reduced the share of the last dollars of lifetime earnings replaced.
For adults born between 2001 and 2010, that change would narrow the gap in mean lifetime
benefits between Black and white beneficiaries by $23,000 and narrow the gap between Hispanic
and white beneficiaries by $19,700. Those gains, however, would close only 19 percent of the
benefit gap between Black and white adults and 21 percent of the benefit gap between Hispanic
and white adults.

Other options are much less effective in promoting equity across racial and ethnic groups.
Adding a new minimum benefit to Social Security would reduce the gap in mean lifetime
benefits between Black and white beneficiaries by only between $3,500 and $5,800, depending
on the minimum benefit option implemented, and it would reduce the gap between Hispanic and
white beneficiaries by only between $1,700 and $2,300. The minimum benefit options we
examine would have only modest effects because only workers with long careers would qualify
for a substantial minimum benefit, and few workers with limited Social Security benefits have
long work histories. Increasing benefits across the board and eliminating federal income taxes
on Social Security benefits would increase racial and ethnic disparities in Social Security
benefits.

Making the benefit formula more progressive is the only reform we considered that
actually reduces benefits for higher-income beneficiaries. The progressive nature of this reform
disproportionately increases benefits for Black and Hispanic beneficiaries while reducing
benefits for white beneficiaries, on average.

Simply paying higher benefits to certain beneficiaries does not necessarily reduce the racial
equity gap. When the extra benefits paid are poorly targeted, they can worsen the equity gap.
Eliminating income taxes on benefits, for example, would eliminate one progressive feature of
the Social Security system, increase the racial equity gap, and significantly worsen Social
Security's long-run finances.

Achieving equity in Social Security benefits for White and Hispanic adults would require
substantial progress toward equality in labor market outcomes. Lifetime earnings largely
determine Social Security benefit levels. Although mortality and marriage also shape Social

Security benefits by determining how long people will collect benefits and whether they have

22
access to spouse and survivor benefits, lifetime earnings are the primary driver of benefits. This
leaves Black and Hispanic workers at a disadvantage, because they receive lower hourly wages
and work fewer years, on average, than white workers. Our recent analysis of the structural
factors responsible for the shortfall in Social Security benefits for Black adults found that
improving Black workers' lifetime earnings could most improve their retirement security
(Johnson and Smith 2023). Changing Social Security alone seems unlikely to narrow existing

racial and ethnic gaps substantially.

23
References

American Academy of Actuaries 2023. Social Security and Financially Disadvantaged Groups:
A Public Policy Issue Paper. Washington, DC.

Arapakis, Karolos and Gal Wettstein. 2023. "How Much Do People Value Annuities and Their
Added Features?"" Working Paper 2023-18. Chestnut Hill, MA: Center for Retirement
Research at Boston College.

Bertrand, Marianne and Sendhil Mullainathan. 2004. "Are Emily and Greg More Employable
than Lakisha and Jamal? A Field Experiment on Labor Market Discrimination."
American Economic Review 94(4): 991-1013.

Bipartisan Policy Center. 2016. Securing Our Financial Future: Report of the Commission on
Retirement Security and Personal Savings. Washington, DC.

 

Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance
Trust Funds. 2023. 2023 Annual Report of the Boards of Trustees of the Federal Hospital
Insurance and Federal Supplementary Medical Insurance Trust Funds. Washington, DC.

 

Board of Trustees, Federal Old-Age and Survivors Insurance and the Federal Disability
Insurance Trust Funds. 2023. The 2023 Annual Report of the Board of Trustees of the
Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.
Washington, DC.

Bosley, Tiffany, Michael Morris, and Karen Glenn. 2018. "Mortality by Career-Average
Earnings Level." Actuarial Study 124. Baltimore, MD: U.S. Social Security
Administration, Office of the Chief Actuary.

Centers for Disease Control and Prevention. 2013. "CDC Health Disparities and Inequalities
Report-~United States, 2013." Morbidity and Mortality Weekly Report 62(3 Supp).

 

Chen, Feinian, Christine A. Mair, Luoman Bao, and Yang Claire Yang. 2014. "Race/Ethnic
Differentials in the Health Consequences of Caring for Grandchildren for Grandparents."
Journal of Gerontology B: Social Sciences 70(5): 793-803.

Chetty, Raj, Michael Stepner, Sarah Abraham, Shelby Lin, Benjamin Scuderi, Nicholas Turner,
Augustin Bergeron, and David Cutler. 2016. "The Association between Income and Life
Expectancy in the United States, 2001-2014." Journal of the American Medical
Association 315(15): 1750-1766.

 

Cosic, Damir, Richard W. Johnson, and Karen E. Smith. 2018. "Will Living Standards Decline
for Future Retirees?" Washington, DC: Urban Institute.

24
Cubanski, Juliette, Wyatt Koma, Anthony Damico, and Tricia Neuman. 2019. "How Much Do
Medicare Beneficiaries Spend Out of Pocket on Health Care?" Washington, DC: Kaiser
Family Foundation.

 

Daly, Mary C., Bart Hobijn, and Joseph H. Pedtke. 2017. "Disappointing Facts about the Black-
White Wage Gap." FRBSF Economic Letter 2017-26. San Francisco, CA: Federal Bank
of San Francisco.

 

Darity, William A. Jr. and Patrick L. Mason. 1998. "Evidence on Discrimination in
Employment: Codes of Color, Codes of Gender." Journal of Economic Perspectives
12(2): 63-90.

 

Dushi, Irina, Howard M. Iams, and Brad Trenkamp. 2017. "The Importance of Social Security
Benefits to the Income of the Aged Population." Social Security Bulletin 77(2).

Ellis, Renee R. and Tavia Simmons. 2014. "Coresident Grandparents and Their Grandchildren:
2012." Washington, DC: U.S. Census Bureau.

 

Favreault, Melissa M. 2018. "How Might Earnings Patterns and Interactions among Certain
Provisions in OASDI Solvency Packages Affect Financing and Distributional Goals?"
Working Paper 2018-2. Chestnut Hill, MA: Center for Retirement Research at Boston
College.

 

 

Favreault, Melissa and Nadia Karamcheva. 2011. How Would the President's Fiscal
Commission's Social Security Proposals Affect Future Beneficiaries? Washington, DC:
Urban Institute.

 

 

Favreault, Melissa M. and Gordon B. T. Mermin. 2008. "Are There Opportunities to Increase
Social Security Progressivity despite Underfunding?" Discussion Paper No. 30.
Washington, DC: Urban-Brookings Tax Policy Center.

 

 

Feagin, Joe and Zinobia Bennefield. 2014. "Systemic Racism and US Health Care." Social
Science and Medicine 103: 7-14.

 

Feinstein, Craig A. 2021. "Diminishing Effect of the Special Minimum PIA." Actuarial Note
Number 162. Baltimore, MD: U.S. Social Security Administration, Office of the Chief
Actuary.

Fuller-Thomson, Esme, A. Nuru-Jeter, Meredith Minkler, and Jack M. Guralnik. 2009. "Black-

White Disparities in Disability among Older Americans: Further Untangling the Role of
Race and Socioeconomic Status." Journal of Aging and Health 21(5): 677-758.

 

Godtland, Erin, Michele, Grgich, Carol Dawn Petersen, and 'Douglas M. Sloane. 2007. "Racial
Disparities in Federal Disability Benefits." Contemporary Economic Policy 25(1): 27-45.

 

25
Hamilton, Darrick and William A. Darity, Jr. 2012. "Crowded Out? The Racial Composition of
American Occupations." In Researching Black Communities: A Methodological Guide,
edited by James S. Jackson, Cleopatra Howard Caldwell, and Sherrill L. Sellers, 60-78.
Ann Arbor, MI: University of Michigan Press.

Harrington Meyer, Madonna, Douglas A. Wolf, and Christine L. Himes. 2004. "Linking Benefits

to Marital Status: Race and Diminishing Access to Social Security Spouse and Widow
Benefits in the U.S." Working Paper 2004-05. Chestnut Hill, MA: Center for Retirement

Research at Boston College.

Hatfield, Laura A., Melissa M. Favreault, Thomas G. McGuire, and Michael E. Chernew. 2018.

"Modeling Health Care Spending Growth of Older Adults." Health Services Research
53(1): 138-155.

Johnson, Richard W. 2021. "Policy Options to Reduce the Black-White Gap in Retirement
Security." Journal of Elder Policy 1(2): 83-112.

Johnson, Richard W., Owen Haaga, and Margaret Simms. 2011. 50+ African American Workers:
A Status Report, Implications, and Recommendations. Washington, DC: AARP.

 

Johnson, Richard W. and Karen E. Smith. 2023. Limitations on Social Security Benefits for
Black Retirees: Exploring Structural Racism's Impact. Washington, DC: Urban Institute.

Johnson, Richard W., Karen E. Smith, and Barbara A. Butrica. 2023. Lifetime Employment-
Related Costs to Women of Providing Family Care. Washington, DC: Urban Institute.

Kail, Ben Lennox, Miles G. Taylor, and Nick Rogers. 2020. "Double Disadvantage in the
Process of Disablement: Race as a Moderator in the Association between Chronic
Conditions and Functional Limitations." Journal of Gerontology: Social Sciences 75(2).
448-458.

 

Kijakazi, Kilolo, Karen E. Smith, and Charmaine Runes. 2019. African American Economic
Security and the Role of Social Security. Washington, DC: Urban Institute.

 

Livingston, Gretchen. 2018. "The Changing Profile of Unmarried Parents: A Growing Share Are
Living with a Partner." Washington, DC: Pew Research Center.

Martin, Patricia P. and John L. Murphy. 2014. "African Americans: Descriptions of Social
Security and Supplemental Security Income Participation and Benefit Levels Using the
American Community Survey." Research and Statistics Note No. 2014-01. Washington,
DC: U.S. Social Security Administration.

Minkler, Meredith, and Esme Fuller-Thomson. 2005. "African American Grandparents Raising

Grandchildren: A National Study Using the Census 2000 American Community Survey."
Journals of Gerontology B: Psychological Sciences and Social Sciences 60(2): S82-S92.

26
Murphy, Dan, Richard W. Johnson, and Gordon B. T. Mermin. 2007. "Racial Differences in
Baby Boomers' Retirement Expectations." Older Americans' Economic Security No. 13.
Washington, DC: Urban Institute.

 

Parker, Kim. 2015. "Women More than Men Adjust Their Careers for Family Life."
Washington, DC: Pew Research Center.

 

Penner, Andrew M. 2008. "Race and Gender Differences in Wages: The Role of Occupational
Sorting at the Point of Hire." Sociological Quarterly 49(3): 597-614.

Reid, Leslie Williams and Beth A. Rubin. 2005. "Integrating Economic Dualism and Labor

Market Segmentation: The Effects of Race, Gender, and Structural Location on Earnings,
1974-2000." Sociological Quarterly 44(3): 405-432.

 

Republican Study Committee. 2022. "RSC Blueprint to Save America: Fiscal Year 2023
Budget." Washington, DC: U.S. House of Representatives.

 

Schulz, Richard and Jill Eden (editors). 2016. Families Caring for an Aging America.
Washington, DC: The National Academies Press.

 

Smith, Karen E., Melissa M. Favreault, Damir Cosic, and Richard W. Johnson. 2018.
"DYNASIM4 Validation Report: Comparing DYNASIM4 Qutcomes with

Administrative Data, Government Forecasts, and Scholarly Literature." Washington DC.:
Urban Institute.

 

Smith, Karen E., Richard W. Johnson, and Melissa M. Favreault. 2020a. Five Democratic
Approaches to Social Security Reform: Estimated Impact of Plans from the 2020
Democratic Presidential Campaign. Washington, DC: Urban Institute.

 

 

Smith, Karen E., Richard W. Johnson, and Melissa M. Favreault. 2020b. "How Would Joe Biden
Reform Social Security and Supplemental Security Income?" Washington, DC: Urban
Institute.

 

U.S. Social Security Administration. 2016. Income of the Population 55 or Older, 2014.
Washington, DC.

 

 

. 2019. "Long-Range OASDI Projection Methodology: Intermediate Assumptions of the
2019 Trustees Report." Baltimore, MD: Office of the Chief Actuary.

 

 

. 2023. Annual Statistical Supplement to the Social Security Bulletin, 2023. Washington,
DC.

 

Waldron, Hillary. 2007. "Trends in Mortality Differentials and Life Expectancy for Male Social
Security-Covered Workers, by Socioeconomic Status." Social Security Bulletin 67(3): 1-
28.

 

27
Figure 1. Impact of Minimum Benefit on Annual Social Security Benefits by Option and Years of
Covered Employment, 2022

 

 

 

 

 

 

 

 

 

=#--Qption MB1 =#=Option MB2 Option MB3
$30,000
$20,000
o
$10,000
$0 moasEEEE - T

 

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43

Years of covered employment

Notes: For options MB1 and MB3, workers must earn at least four covered quarters to be credited with a year of

employment. For option MB2, workers must earn more than $10,875 in 2017 wage-adjusted dollars to be credited
with a year of employment.
Source: Authors' calculations.

28
Figure 2. Percent Change in Social Security's 75-Year Unfunded Liability from Proposed Benefit
Enhancements

 

More progressive benefit formula --

Minimum benefits |
Option MB1: 125% of FPL after 30-year career 2
Option MB2: 40% of AWI after 40-year career E 7
Option MB3: 100% of FPL after 10-year career or DI
Caregiver credits
Option CC1: 100% of AWI 11
Option CC2: Up to 50% of AWI E 5
Option CC3: Up to 50% of AWI, limited to 5 years | 5
Adjust survivor benefits |
Option SB1: 75% of combined benefit to spouse F 24
Option SB2: 75% of combined benefit, subject to cap = |
Longevity bonus 6
Across-the-board benefit increase b 30
Eliminate federal taxes on benefits N | 30

0 5 10 15 20 25 30 35
Percent change

 

 

Notes: We measure Social Security's 75-year unfunded liability in 2025. FPL = federal poverty level. AWI =
average wage index.
Source: DYNASIMA4, runid 1004.

29
Table 1. Summary of Modeled Social Security Benefit Enhancements

 

Provision

Description

 

More progressive
benefit formula

For workers newly eligible in 2024, increase the first bend point from $1,174 to
$1,503, add a new bend point at $5,018, and keep the last bend point at $7,078.
The new replacement rates would be 95% before the first bend point (up from
90%), 32% between the first and second bend points, 15% between the second and
third bend points, and 5% above the third bend point.

 

Minimum benefit
Option MB1

For beneficiaries newly eligible in 2024, initial minimum PIA is 6.25% of FPL
with 11 years of covered employment, increasing 6.25 percentage points with each
additional employment year until it reaches 125% of FPL after 30 years of
employment. Workers must earn at least 4 covered quarters to be credited with an
employment year. The minimum benefit is indexed by wage growth after 2024.

 

Option MB2

For workers newly eligible in 2024, initial minimum PIA is 15% of AWI with 10
years of covered employment, increasing 0.833 percentage points with each
additional employment year until it reaches 40% of AWI after 40 years of covered
employment. Workers must earn more than $10,857 in 2017 wage-adjusted dollars
to receive credit for an employment year.

 

Option MB3

For all beneficiaries beginning in 2025, 100% of FPL with 10 or more years of
covered employment or DI receipt. Workers must earn at least 4 covered quarters
to be credited with an employment year.

 

Caregiver credits

 

 

Option CC1 Beginning in 2025, credit = 100% of AWI, credited each year that a caregiver has a
child younger than age 6, with no cap on the number of caregiver years.

Option CC2 Beginning in 2025, credit = 50% of AWI, credited each year that a caregiver has a
child younger than age 6, with no cap on the number of caregiver years.

Option CC3 Beginning in 2025, credit = 50% of AWI, offset by 50 cents for every $1 earned,

credited each year that a caregiver has a child younger than age 13. Credit is
limited to 5 caregiving years.

 

Survivor benefits

 

Option SB1 Beginning in 2025, survivor benefit = maximum of (a) 100% of the deceased
spouse's benefit, and (b) 75% of the combined benefit that the two spouses
received when both were alive.

Option SB2 Beginning in 2025, survivor benefit = maximum of (a) 100% of the deceased

spouse's benefit, and (b) 75% of the combined benefit that the two spouses
received when both were alive but no more than the PIA for beneficiaries with
average career earnings.

 

Longevity bonus

Beginning in 2025, at the 16th year of benefit receipt, increase payments by 1% of
the PIA of a hypothetical average wage earner in the year of initial entitlement,
then provide an additional 1% each year until the bump-up reaches 5% of PIA.

 

Across-the-board
benefit increase

Beginning in 2023, increase the first replacement rate in the benefit formula by 5
percentage points (from 90% to 95%), and increase the first bend point in the
formula by 22%.

 

Eliminate federal
taxes on benefits

End federal income taxation of Social Security benefits.

 

Notes: FPL = federal poverty level. AWI = average wage index. PIA = primary insurance amount.
Source: Authors' assumptions.

30
Table 2. Baseline Social Security Benefits by Race and Ethnicity, 2022 Inflation-Adjusted
Dollars

 

 

 

Annual Lifetime Value,
Value, 2080 Adults Born between 2001 and 2010
Benefits
minus
Benefits Benefits Contributions contributions
Mean amount ($)
All 32,000 587,400 623,700 -36,300
Black 28,700 503,200 487,700 15,500
Hispanic 28,900 531,900 514,800 17,100
White 34,000 621,600 698,600 -77,000
Dollar amount difference from
amount for white adults
Black -5,300 -118,400 -210,900 92,500
Hispanic -5,100 -89,700 -183,800 94,100
Percent difference from
amount
for white adults
Black -16 -19 -30 na
Hispanic -15 -14 -26 na
Share of total benefits going to
Black 11 11 10 na
Hispanic 22 23 21 na

 

Notes: All amounts are reported in inflation-adjusted 2022 dollars and rounded to the nearest $100. Estimates of
annual benefits are restricted to US citizens and other lawful permanent residents ages 62 and older who receive
benefits in 2080, and estimates of lifetime benefits are restricted to US citizens and other lawful permanent residents
born between 2001 and 2010 who survive to age 25. The Black and white groups exclude Hispanic adults. Social
Security benefit amounts subtract any income taxes paid on those benefits. Lifetime benefits and contributions are
computed by summing all price-adjusted annual amounts and discounting to age 65. For wage and salary workers,
contributions include payments from employees and their employers. Racial differences are computed by
subtracting amounts for white adults from amounts for Black and Hispanic adults; the percent differences divide the
raw difference by the amount for white adults. na= not applicable.

Source: DYNASIMA4, runid 1004.

31
Table 3. Percentage of Social Security Beneficiaries with Low Benefits or Limited Income by
Race and Ethnicity, 2080

 

Annual Adjusted
Annual Benefits Annual Benefits Income Less
Less than 100% Less than 125% than 25% of the

 

of the FPL of the FPL AWI
Percentage
All 6.5 124 19.0
Black 10.0 18.4 26.4
Hispanic 9.9 18.0 25.5
White 43 8.4 15.5
Percentage point difference
from share for white
beneficiaries
Black 5.7 10.0 10.9
Hispanic 5.6 9.6 10.0

 

Notes: Estimates are restricted to US citizens and other lawful permanent residents ages 62 and older who receive
Social Security benefits in 2080. The Black and white groups exclude Hispanic adults. Social Security benefit
amounts subtract any income taxes paid on those benefits. Adjusted family income includes income from earnings;
partnerships and S-corporations; Social Security, SSI, and other government benefits; defined benefit pensions;
interest, dividends, and rents; capital gains; and retirement account withdrawals; less federal income tax, state
income tax, payroll tax, and Medicare premiums. Racial differences are computed by subtracting amounts for white
beneficiaries from amounts for Black and Hispanic beneficiaries. FPL = federal poverty level. AWI = average wage
index.

Source: DYNASIMA4, runid 1004.

32
Table 4. Projected Increase in Mean Lifetime Social Security Benefits from Proposed Benefit
Enhancements, Adults Born between 2001 and 2010

 

Dollar Percent

 

 

 

 

 

 

 

 

 

 

 

 

More progressive benefit formula 8,500 1.5
Minimum benefit

Option MB1: 125% of FPL after 30-year career 3,900 0.7

Option MB2: 40% of AWI after 40-year career 13,500 2.3

Option MB3: 100% of FPL after 10-year career or DI receipt 2,400 0.4
Caregiver credits

Option CC1: 100% of AWI 21,400 3.6

Option CC2: Up to 50% of AWI 8,200 1.4

Option CC3: Up to 50% of AWI, limited to 5 years 7,100 1.2
Adjust survivor benefits

Option SB1: 75% of total benefit when both spouses were alive 25,600 4.4

Option SB2: 75% of combined benefit, subject to cap 1,300 0.2
Longevity bonus 7,600 1.3
Across-the-board benefit increase 47,100 8.0
Eliminate federal taxes on benefits 84,400 14.4

 

Notes: Estimates of lifetime benefits are restricted to US citizens and other lawful permanent residents born
between 2001 and 2010 who survive to age 25. Benefit amounts subtract any income taxes paid on those benefits.
They are expressed in inflation-adjusted 2022 dollars and rounded to the nearest $100. Lifetime benefits are
computed by summing all price-adjusted annual amounts and discounting to age 65. FPL = federal poverty level.
AWI = average wage index.

Source: DYNASIMA4, runid 1004.

33
Table 5. Impact of Proposed Benefit Enhancements on Mean Lifetime Social Security Benefits by
Race and Ethnicity, Adults Born between 2001 and 2010

 

Percentage of
New Benefits
Going to Adults
Dollar Increase Percent Increase Who Are:

 

Black Hispanic White Black Hispanic White Black Hispanic

 

More progressive benefit
formula 23,800 20,500 800 4.7 3.8 0.1 36 60

 

Minimum benefit
Option MB1: 125% of

 

FPL after 30-year carcer 6,700 4,800 2,900 1.3 0.9 0.5 22 31
Option MB2; 40% of
AWI after 40-year carcer 17,900 14,400 12,100 3.6 2.7 2.1 17 27

 

Option MB3: 100% of
FPL after 10-year career
or DI receipt 4,900 3,100 1,400 1.0 0.6 0.2 26 32

 

Caregiver credits
Option CC1: 100% of

 

AWI 21,100 33,800 16,100 42 6.4 2.6 13 40
Option CC2: Up to 50%
of AWI 8,800 14,200 5,500 1.7 2.7 0.9 14 43

 

Option CC3: Up to 50%
of AWI, limited to 5
years 8,600 10,600 5,200 1.7 2.0 0.8 16 38

 

Adjust survivor benefits
Option SB1: 75% of total
benefit when both
spouses were alive 21,900 19,700 28,300 4.4 3.7 4.8 11 19

 

Option SB2: 75% of
combined benefit, subject
to cap 1,900 1,300 1,200 0.4 0.3 0.2 19 26

 

Longevity bonus 6,900 7,700 7,600 1.4 1.5 1.3 12 25

 

Across-the-board benefit
increase 44,900 45,400 47,800 8.9 8.5 8.1 12 24

 

Eliminate federal taxes on
benefits 58,700 63,700 96,700 11.7 12.0 16.5 9 19

 

Notes: The sample is restricted to US citizens and other lawful permanent resident adults born between 2001 and
2010 who survive to age 25. The Black and white groups exclude Hispanic adults. Benefit amounts subtract any
income taxes paid on those benefits. They are expressed in inflation-adjusted 2022 dollars and rounded to the
nearest $100. Lifetime benefits are computed by summing all price-adjusted annual amounts and discounting to age
65. FPL = federal poverty level. AWI = average wage index.

Source: DYNASIM4, runid 1004.

34
Table 6. Projected Reduction in the Racial and Ethnic Gap in Mean Lifetime Social Security

Benefits from Proposed Benefit Enhancements, Adults Born between 2001 and 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dollar Change Percent Change
in the Gap in the Gap
Black Hispanic Black Hispanic
@ 2) 3 "@

More progressive benefit formula 23,000 19,700 19.4 22.0
Minimum benefit

Option MB1: 125% of FPL after 30-year career 3,800 1,900 3.2 2.1

Option MB2: 40% of AWI after 40-year career 5,800 2,300 4.9 2.6

Option MB3: 100% of FPL after 10-year career or

DI receipt 3,500 1,700 3.0 1.9
Caregiver credits

Option CC1: 100% of AWI 5,000 17,700 4.2 19.7

Option CC2: Up to 50% of AWI 3,300 8,700 2.8 9.7

Option CC3: Up to 50% of AWI, limited to 5

years 3,400 5,400 2.9 6.0
Adjust survivor benefits

Option SB1: 75% of total benefit when both

spouses were alive -6,400 -8,600 -5.4 9.6

Option SB2: 75% of combined benefit, subject to

cap 700 100 0.6 0.1
Longevity bonus -700 100 -0.6 0.1
Across-the-board benefit increase -2,900 -2,400 -2.4 2.7
Eliminate federal taxes on benefits -38,000 -33,000 -32.1 -36.8

 

Notes: Columns 1 and 3 show the projected reduction from each proposed enhancement in the shortfall of mean
lifetime Social Security benefits for Black adults relative to white adults, and columns 2 and 4 show the projected
reduction in the shortfall for Hispanic adults relative to white adults. The percent change is calculated relative to a
$118,400 gap for Black adults and $89,700 gap for Hispanic adults. The sample is restricted to US citizens and
other lawful permanent resident adults born between 2001 and 2010 who survive to age 25. The Black and white

groups exclude Hispanic adults. Benefit amounts subtract any income taxes paid on those benefits. They are

expressed in inflation-adjusted 2022 dollars and rounded to the nearest $100. Lifetime benefits are computed by
summing all price-adjusted annual amounts and discounting to age 65. FPL = federal poverty level. AWI = average

wage index.
Source: DYNASIMA4, runid 1004.

35
Table 7. Impact of Proposed Benefit Enhancements on the Prevalence of Annual Social Security
Benefits below 125 Percent of the FPL at Ages 62 and Older by Race and Ethnicity, 2080

 

 

 

 

 

 

 

 

 

 

Percentage Point Change in the Share Percent Change in the Number with
with Annual Benefits below Annual Benefits below
125% of the FPL 125% of the FPL
All Black Hispanic White All Black Hispanic White

Make the benefit formula
more progressive -2.8 -5.0 -3.6 -1.7 -23 =27 -20 -20
Minimum benefit

Option MB1: 125% of FPL

after 30-year carcer -1.7 -3.0 -2.1 -1.2 -14 -16 -12 -14

Option MB2: 40% of AWI

after 40-year carcer -14 -2.5 -1.6 -1.0 -11 -14 9 -12

Option MB3: 100% of FPL

after 10-year career or DI

receipt 0.0 0.0 0.0 0.0 0 0 0 0
Caregiver credits

Option CC1: 100% of AWI -3.4 -4.0 -6.4 -2.1 -27 -22 -36 -25

Option CC2: Up to 50% of

AWI -1.8 -2.1 -3.2 -1.2 -15 -11 -18 -14

Option CC3: Up to 50% of

AWI, limited to 5 years -1.2 -1.9 -1.7 -0.8 -10 -10 9 -10
Adjust survivor benefits

Option SB1: 75% of total
benefit when both spouses
were alive -0.5 -0.6 -0.7 -0.3 -4 -3 4 4

 

Option SB2: 75% of
combined benefit, subject
to cap -0.2 -0.2 -0.3 -0.1 -2 -1 -2 -1

 

Longevity bonus -1.0 -1.5 -1.2 -0.7 -8 -8 -7 -8

 

Across-the-board benefit
increase -3.1 -5.1 4.1 2.2 -25 -28 -23 -26

 

Eliminate federal taxes on
benefits -2.7 -3.1 -3.2 2.2 22 -17 -18 -26

 

Notes: The sample is restricted to US citizens and other lawful permanent residents ages 62 and older receiving
Social Security benefits in 2080. The Black and white groups exclude Hispanic adults. Benefit amounts subtract
any income taxes paid on those benefits. FPL = federal poverty level. AWI = average wage index.

Source: DYNASIMA4, runid 1004.

36
Table 8. Impact of Proposed Benefit Enhancements on the Prevalence of Annual Social Security
Benefits below 100 Percent of the FPL at Ages 62 and Older by Race and Ethnicity, 2080

 

 

 

 

 

 

 

 

 

 

Percentage Point Change in the Share Percent Change in the Number with
with Annual Benefits below Annual Benefits below
100% of the FPL 100% of the FPL
All Black Hispanic White All Black Hispanic White

Make the benefit formula
more progressive 0.7 -1.4 -1.1 -0.5 -11 -14 -11 -12
Minimum benefit

Option MB1: 125% of FPL

after 30-year carcer 0.4 -1.0 -0.6 -0.4 -6 -10 -6 -9

Option MB2: 40% of AWI

after 40-year carcer 0.3 -0.7 -0.4 -0.3 -5 -7 -4 -7

Option MB3: 100% of FPL

after 10-year career or DI

receipt -2.2 -4.4 -3.8 -1.1 -34 -44 -38 -26
Caregiver credits

Option CC1: 100% of AWI -2.0 -2.5 4.2 -1.1 -31 -25 42 -26

Option CC2: Up to 50% of

AWI -1.3 -1.5 -2.9 -0.8 -20 -15 -29 -19

Option CC3: Up to 50% of

AWI, limited to 5 years -0.8 -1.5 -1.4 -0.5 -12 -15 -14 -12
Adjust survivor benefits

Option SB1: 75% of total
benefit when both spouses
were alive -0.1 -0.2 -0.1 -0.1 -2 -2 -1 -2

 

Option SB2: 75% of
combined benefit, subject
to cap 0.0 -0.2 -0.1 -0.1 0 -2 -1 -2

 

Longevity bonus -0.4 -0.7 -0.8 -0.3 -6 -7 -8 -7

 

Across-the-board benefit
increase 0.8 -1.5 -1.2 -0.6 -12 -15 -12 -14

 

Eliminate federal taxes on
benefits -1.1 -1.5 -1.4 -0.9 -17 -15 -14 21

 

Notes: The sample is restricted to US citizens and other lawful permanent residents ages 62 and older receiving
Social Security benefits in 2080. The Black and white groups exclude Hispanic adults. Benefit amounts subtract
any income taxes paid on those benefits. FPL = federal poverty level. AWI = average wage index.

Source: DYNASIMA4, runid 1004.

37
Table 9. Impact of Proposed Benefit Enhancements on the Prevalence of Limited Income by

Race and Ethnicity, Social Security Beneficiaries Ages 62 and Older, 2080

 

Percentage Point Change in the Share
with Adjusted Family Income below

Percent Change in the Number with
Adjusted Family Income below

 

 

 

 

 

 

 

 

 

 

 

 

 

25% of the AWI 25% of the AWI
All Black Hispanic White All Black Hispanic White

Make the benefit formula
more progressive -2.5 -2.8 -2.8 -2.3 -13 -11 -11 -15
Minimum benefit

Option MB1: 125% of FPL

after 30-year carcer -0.3 -0.4 -0.4 -0.3 -2 -2 -2 -2

Option MB2: 40% of AWI

after 40-year carcer -0.8 -1.1 -0.9 -0.8 -4 4 4 -5

Option MB3: 100% of FPL

after 10-year career or DI

receipt -0.1 -0.2 -0.1 -0.1 -1 -1 0 -1
Caregiver credits

Option CC1: 100% of AWI -1.4 -1.1 -1.9 -1.3 -7 4 -7 -8

Option CC2: Up to 50% of

AWI -0.5 -0.5 -0.6 -0.4 -3 -2 2 -3

Option CC3: Up to 50% of

AWI, limited to 5 years -0.4 -0.3 -0.4 -0.4 -2 -1 -2 -3
Adjust survivor benefits

Option SB1: 75% of total

benefit when both spouses

were alive -1.7 -1.7 -1.6 -1.7 -9 -6 -6 -11

Option SB2: 75% of

combined benefit, subject

to cap -0.1 -0.1 -0.1 -0.1 -1 0 0 -1
Longevity bonus -0.5 -0.4 -0.4 -0.6 -3 -2 -2 4
Across-the-board benefit
increase -2.6 -2.6 -2.8 -2.6 -14 -10 -11 -17
Eliminate federal taxes on
benefits -0.6 -0.6 -0.7 -0.6 -3 -2 -3 4

 

Notes: The sample is restricted to US citizens and other lawful permanent residents ages 62 and older receiving

Social Security benefits in 2080. The Black and white groups exclude Hispanic adults. Adjusted family income
includes income from earnings; partnerships and S-corporations; Social Security, SSI, and other government
benefits; defined benefit pensions; interest, dividends, and rents; capital gains; and retirement account withdrawals;
less federal income tax, state income tax, payroll tax, and Medicare premiums. FPL = federal poverty level. AWI =

average wage index.

Source: DYNASIMA4, runid 1004.

38
RECENT WORKING PAPERS FROM THE
CENTER FOR RETIREMENT RESEARCH AT BOSTON COLLEGE

The Impact of High-Pressure Labor Markets on Retirement Security
Stipica Mudrazija and Barbara A. Butrica, December 2023

How Many Medicaid Recipients Might Be Eligible for SS1?
Michael Levere and David Wittenburg, November 2023

Are Older Workers Good for Business?
Laura D. Quinby, Gal Wettstein, and James Giles, November 2023

How Much Do People Value Annuities and Their Added Features?
Karolos Arapakis and Gal Wettstein, November 2023

Experiences, Behaviors, and Attitudes About COVID-19 for People with Disabilities Over
Time
Amal Harrati, Marisa Shenk, and Bernadeite Hicks, October 2023

Shared Households as a Safety Net for Older Adults
Hope Harvey and Kristin L. Perkins, October 2023

The Impact of Losing Childhood Supplemental Security Income Benefits on Long-Term
Education and Health Outcomes
Priyanka Anand and Hansoo Ko, October 2023

What Is the Insurance Value of Social Security by Race and Socioeconomic Status?
Karolos Arapakis, Gal Wettstein, and Yimeng Yin, September 2023

Does Temporary Disability Insurance Reduce Older Workers' Reliance on Social Security
Disability Insurance?
Siyan Liu, Laura D. Quinby, and James Giles, September 2023

How Will Employer Health Insurance Affect Wages and Social Security Finances?
Angi Chen, Alicia H. Munnell, and Diana Horvath, September 2023

What Are the Implications of Rising Debt for Older Americans?
Angi Chen, Siyan Liu, and Alicia H. Munnell, September 2023

Wills, Wealth, and Race
Jean-Pierre Aubry, Alicia H. Munnell, and Gal Wettstein, August 2023

All working papers are available on the Center for Retirement Research website
(https://crr.bc.edu) and can be requested by e-mail (crr@bc.edu) or phone (617-552-1762).

39