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Over the years, bipartisan recommendations for putting Social Security on a more fiscally sustainable path have used various combinations of revenue increases and benefit reductions. Many have also included reforms that would ensure adequate benefits, known as adequacy adjustments, for those who particularly depend on the income the program provides.

This report by Melissa Favreault and Karen Smith at the Urban Institute examines the distributive effects of ten popular adequacy adjustments, identifying how each adjustment would impact different groups of people broken down by a) lifetime earnings, (b) poverty status, (c) years of low-wage work, (d) total lifetime work effort, and (e) age.  

The significance of this simulation analysis using Urban Institute’s DYNASIM model is its focus on projecting the distribution of benefits for these ten adequacy adjustments among future Social Security beneficiaries. Thus, instead of the usual focus on the solvency impacts of Social Security reforms, this report informs policymakers on where the benefits of reforms will likely go, which can inform debates about how to structure future Social Security changes.

Criteria for Evaluating Adequacy Adjustments

Different policymakers bring different criteria to bear in analyzing Social Security reform proposals, depending on their priorities. This report evaluates the ten adequacy adjustments using the following four criteria that allow for a focus on beneficiaries, particularly those in lower-income groups:

·         Adequacy: How would a proposal improve benefits for those most vulnerable to poverty or near poverty? Would the proposal provide adequate income for these people to live?

·         Target efficiency (“bang for the buck”): Would new resources be targeted at those who need them most (for example, those at the bottom of the lifetime earnings distribution), especially relative to proposals of similar cost? Alternatively, would significant new resources go to those who do not really need them?

·         Economic efficiency: Would the proposal reward or otherwise encourage additional work and saving, or at least minimize disincentives to work and saving?

·         Equity: Would the proposal help equalize Social Security’s treatment of individuals in similar circumstances (for example, families paying similar payroll taxes)?

The Ten Adequacy Adjustment Options

A)  Establish a minimum benefit through the tax system.

Provides a minimum benefit equal to the poverty level, using individual tax returns to calculate eligibility, with the Social Security Administration adjusting monthly benefits based on the IRS information.

B)  Provide a flat credit for unpaid/low-paid caregivers of children.

Social Security would “credit” caregivers up to half the average wage, for up to five years for those with two or more children, and up to three years for one child.

C)  Establish a minimum benefit based on covered quarters (for long-time low wage workers).

Grant additional benefits to those who fall below a certain percentage of poverty, based on the number of years (22 or more, or 88 quarters) a person worked.

D) Reduce the qualifying marriage duration (in case of divorce) for spouse and survivor benefits down to 7 years.

E) Enhance survivor benefits for couples with similar earnings.

To lessen sharp drops in income upon the death of a spouse, grant the surviving spouse a benefit equal to 75 percent of the combined couple benefit, capped at the benefit level of an average-wage worker.

F) Provide a benefit boost for long-term beneficiaries.  

Give long-term Social Security beneficiaries, at higher risk of poverty, a modest, calculated increase each year starting at age 81; for those receiving disability insurance benefits, the full boost would begin after 25 years of benefit receipt.

G) Enhance benefits for earnings below the first “bend point” by increasing the first benefit formula factor from 90 to 95 percent of AIME.

Change the Social Security benefit formula, which is progressive, so that it replaces lower lifetime earnings at a higher rate.

H) Provide a benefit boost to older beneficiaries. 

All Social Security beneficiaries ages 85 and older, prone to poverty having exhausted savings, would receive a modest, calculated “bump-up” in their benefit starting at age 81. (Note: option F above includes long-term Disability Insurance beneficiaries, option H does not.)

I) Exclude years spent providing unpaid care to children from the benefit calculation.

Reduce the number of years used to compute Social Security benefits for individuals providing unpaid child care, thereby reducing the “penalty” of reporting zero income, for up to five years spent caring for a child.

J) Use the CPI-E to compute the annual COLA for Social Security.

The CPI-E, the Consumer Price Index-Elderly, captures costs of living for older adults; it places more weight on health care spending and would likely result in higher and more appropriate COLAs (Cost of Living Adjustments).


Adequacy adjustments, included in many Social Security reform proposals, provide new pathways to help support long-term low-wage workers, caregivers, long-term beneficiaries, and survivors. This report examines the effectiveness of 10 adequacy adjustments at targeting benefits by income, poverty status, lifetime work effort, and age.

Generally, guaranteed minimum benefits and caregiver credits direct more benefits to the most vulnerable retirees and workers with disabilities. Adequacy adjustments that boost benefits for long-term beneficiaries are more effective at directing additional benefits towards older beneficiaries. Finally, establishing a minimum benefit based on the number of covered quarters of work is especially well-suited to channeling additional benefits to long-term low-wage workers.