Imagine a retirement program with the following features:
- The vast majority of U.S. workers are covered, employees and self-employed
- It’s portable, so you’ll still get the benefits if you switch jobs
- It provides guaranteed monthly checks in retirement
- You receive the money for as long as you live
- The amount of your retirement income rises with inflation
- There are no fees and administration costs are low
- The future financial health of the program is transparent
Sounds pretty good, no? As you’ve probably guessed, I’ve just described the Social Security retirement program. Friday, Aug. 14 marks the 80th anniversary of the day President Franklin D. Roosevelt signed the Social Security Act into law.
“Social Security, at 80, is an all-important safety net in our society,” says Catherine Collinson, president of the Transamerica Center for Retirement Studies. “For many, Social Security benefits mean the difference between a passable retirement versus living in poverty.”
I was reminded of the benefits of Social Security at a presentation I heard last week while attending the Retirement Research Consortium in Washington, D.C. It’s an annual gathering of the nation’s sharpest retirement analysts and scholars lassoed by the Michigan Retirement Research Center, National Bureau of Economic Research and the Center for Retirement Research at Boston College.
Social Security was a major theme at the conference — no surprise. And credit goes to Virginia Reno, Deputy Commissioner for Retirement and Disability Policy at the Social Security Administration, for laying out the program’s sometimes-overlooked features.
Granted, a complete description would also note that the Social Security trust fund for its retirement program is estimated to be exhausted in 2035 (happy 100th birthday, Social Security!), just 20 years from now. Worse, the Social Security trust fund for its disability program is due to run dry in late 2016.
Clearly, at some point between now and 2016 and 2035, Congress and the President will need to find ways to stave off the trust funds’ insolvency. I’m certain they will — just as they have in the past. As Collinson told me: “Social Security is in need of modernization in order to keep its promises to future generations.”
But for now, with Social Security’s birthday approaching and with apologies to the Harper’s Index, I’d like to offer a few key Social Security numbers (and not the ones on your Social Security card):
59 million: The total number of Social Security beneficiaries (in 1970, it was 25.7 million)
$900 billion: The amount of benefits expected to be paid by Social Security in 2015
6.2: The tax rate employers and employees pay into Social Security
67: The Full Retirement Age for Social Security benefits for anyone born in 1960 or later. The Full Retirement Age is 66 for those born between 1943 and 1954 and gradually rises from 66 to 67 for those born between 1955 and 1960.
62: The earliest you can claim Social Security retirement benefits
70: The latest you can begin claiming Social Security retirement benefits
36: The percentage of men claiming Social Security benefits at 62
39.5: The percentage women claiming Social Security benefits at 62
90: The percent of Americans 65 and older receiving Social Security benefits
38: The percentage of the elderly’s income from Social Security
74: The percentage of single Social Security beneficiaries receiving 50 percent or more of their income from Social Security
47: The percentage of single Social Security beneficiaries relying on Social Security for 90 percent or more of their income
40: The percentage of pre-retirement earnings that Social Security now represents for the typical age 65 worker, according to the Center for Retirement Research
10: The minimum number of years you must have worked and paid into Social Security before you are eligible for retirement benefits
35: The number of your highest-earning years that Social Security counts when determining your retirement benefit
$118,500: The maximum amount of earnings subject to Social Security payroll taxes
$15,720: The “earnings test” figure — it’s the most you can earn before your benefits are taxed if you claim Social Security before Full Retirement Age. If you earn more, your benefits are cut by $1 for every $2 the wage earnings exceed the limit. (At Full Retirement Age, you lose $1 in benefits for every $3 earned above the $41,880 limit.)
$2,663: The maximum monthly Social Security benefit for workers retiring at Full Retirement Age
$1,469: Average monthly retirement benefit for men
$1,111: Average monthly retirement benefit for women
2.8: The current number of workers paying Social Security taxes for each Social Security beneficiary
2.1: The estimated number of workers paying Social Security taxes for each Social Security beneficiary by 2033
28: The percentage of people receiving a passing grade when asked basic questions about Social Security by MassMutual
29: The percentage of workers in their 60s and older who say they know “a great deal” about Social Security, according to Transamerica Center for Retirement Studies
69: The percentage of workers who expect Social Security to be a source of income in retirement, according to Transamerica Center for Retirement Studies
81: The percentage of people in their 20s who are concerned that Social Security won’t be there for them when they’re ready to retire, according to the Transamerica Center for Retirement Studies
26: The percentage of Millennials who say they expect to rely on Social Security to fund retirement, according to a Merrill Lynch/Age Wave study
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