Preparing for retirement reforms: Potential consequences for saving, work, and retirement plans

October 2021

If policymakers fail to act, Social Security benefits, which provide the largest portion of retirement income for many Americans, will be cut by about 25% starting in 2035.


Even with Social Security reform, some combination of a slowdown in benefit growth for retirees and higher taxes on workers likely will occur. This study, conducted by the Urban Institute and sponsored by the TIAA Institute, gauges the potential impact of reforms by quantifying the size and composition of current and projected Social Security beneficiaries with inadequate retirement income. It also examines the extent to which adequacy gaps can be reduced through additional work and saving.

Key Insights
Under current law, the share of retirees with inadequate income will increase from 26% in 2020 to 45% by 2090, including a sharp increase after 2034.
Most of the income gains from working longer accrue to workers before retirement, with only a modest portion of the gains directly increasing incomes in retirement.
An immediate but permanent increase in the saving rate initially has a smaller impact on retirement income adequacy than a comparable increase in years of work, but in later years saving more has a bigger impact.
By 2065, more saving reduces the share of Social Security beneficiaries unable to replace 75% of preretirement earnings by 5 to 13 percentage points.
Low earners and people with few work years gain only modestly from working longer and saving more.

To gauge retirement income levels of Social Security beneficiaries, the authors use the Urban Institute’s Dynamic Simulation of Income Model Version 4, the most sophisticated microsimulation model for retirement behavior available outside of government.