Policy In Context: How Would Social Security Insolvency Disproportionately Affect the Black Community?

If Social Security became insolvent, Black Americans would be disproportionately hurt for two reasons. First, they already receive smaller Social Security benefits on average, so if benefits were cut in the event of a bankruptcy, as prescribed by law, Black Americans’ benefits would be especially low. And second, Black Americans tend to rely on Social Security for a greater percentage of their retirement income, so such a cut in benefits would be especially painful.

It is well-documented that Black Americans earn less, on average, than white Americans. The average white household earns $77,250 a year, while the average Black household earns $52,860. And because your Social Security benefits are determined in part by how much in payroll taxes you contribute, this disparity translates into lower lifetime Social Security benefits.

Black Americans also rely on Social Security for a greater percentage of their retirement income. A 2016 study by the Social Security Administration revealed that 19 percent of Black families relied on Social Security for 100 percent of their retirement income, while 11 percent of white families did so.

Remember, if Congress doesn’t step in before 2035, then every single Social Security recipient will see their benefits fall by the proportion of the trust funds’ shortfall, which is projected to be about 17 percent. So low-income earners could see their $19,905 annual benefit fall to $15,521, a drop of $3,384.

For retirees who depend on Social Security for 100 percent of their income, a cut of that size could be devastating, which is all the more reason why reform-minded leaders must make sure it never happens.