Seniors Hand In Hand Garry Knight

Source: Flickr user Garry Knight

Millions of Americans nationwide count on Social Security payments to cover their expenses in retirement, but the five states with the highest percentage of their population receiving Social Security benefits are Alabama, Arkansas, Maine, Vermont, and West Virginia -- all of which are home to a population that is older than the national average.

The Social Security lifeline

In the South, 25.1% of West Virginians rely on Social Security and more than 22% of the population of Arkansas and Alabama collect Social Security, too. In the Northeast, 24.5% of Maine residents and 22.4% Vermont residents also receive Social Security. Overall, all five states boast a proportion of people receiving Social Security that's notably higher than the national average of 18.5%.

In these five states, Social Security plays an outsize role in providing financial security to seniors in part because the median age of the population in each of these states has been increasing due to changing economic times.

For example, decades of slowing coal production has forced many young people in West Virginia to move to other states in search of work; and a decline in the logging industry in Maine has led to a similar exodus of working age people there.

As a result, West Virginia's median age is 41.3 and the median age of a person living in Maine is 42.7. Arkansas, Alabama, and Vermont residents are older than the typical 37 year old American, too.

In those states, Social Security's importance can't be overstated.

According to the non-profit Social Security Works, without Social Security, the poverty rate among elderly West Virginians would soar from 9% to 51.8%. Similarly, if Social Security didn't exist in Maine, then the poverty rate among seniors would increase from 8% to nearly 50%.

Clearly, Social Security is insuring financial security for millions of Americans in these states, but worries that an increasingly larger and older American population will lead to Social Security expenditures outstripping Social Security taxes has many industry watchers worrying that significant changes to Social Security could be coming and that those changes could jeopardize the well-being of seniors.

For the most part, talk of a Social Security bankruptcy is more punditry than a reality, but tough and unpopular decisions in regard to higher tax rates, lower payouts, and the age at which people can collect Social Security may be necessary at some point if we want to keep Social Security financially ship-shape.

How much are recipients getting?

Social Security payments are based on how much income is earned during a person's 35 highest wage earning years and the age at which a person starts receiving Social Security, but overall, the average person in America, including those on disability, was getting $1,215 per month from Social Security exiting 2014.

The average recipient in four of these five states; however, was receiving less than the national average, with recipients in Arkansas receiving just $1,130 per month.

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Source: Social Security & author's calculation

What lies ahead

Whether or not these five states will continue to have the largest proportion of their population receiving Social Security isn't certain, but potential changes to Social Security down the road suggests that people in every state are going to need to take a more active role in preparing for retirement than they are today. According to the US Government Accountability Office, as many as half of all households with Americans age 55 or older haven't set aside any money for retirement yet. That's a scary revelation that should encourage all of us to begin thinking a lot more about our expectations for retirement and how we can achieve our retirement goals. 

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