Social Security
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Social Security is one of the primary governmental programs providing income for elderly or disabled individuals. Regulated through many rules and requirements, the program is the result of the Social Security Act of 1935, which was signed into law by President Franklin D. Roosevelt. The law established benefits throughout the country that serve as a major source of income for elderly and disabled United States citizens and their dependents. Increases in population and life expectancy have caused Social Security to grow since the early years of the act, bringing about regular adjustments and several amendments since the original passage of the law.[1]
- See also: Social Security Act of 1935
Background
Funding
The Social Security program is funded through a tax known as the FICA tax. FICA, or the Federal Insurance Contributions Act, affects all employee paychecks and collects funds that are distributed into two federal programs: Social Security and Medicare. FICA establishes a maximum Social Security payment but does not have an overall limit. Once the maximum contribution to Social Security is reached, any remaining contributions go toward Medicare. Employers and employees are both required to make these payments. In 2010, the Social Security tax for employees was 6.2 percent, while the total FICA tax was 7.65 percent. Under FICA rules, employers were required to make a matching contribution.[4]
Payments
In 2015, approximately $876.6 billion in Social Security payments were made out of the Old-Age, Survivors, and Disability Insurance (OASDI) trust fund. This fund is the primary method of paying benefits to those who have lost income due to retirement, death or disability. The total amount paid in 2015 was higher than in any previous year and is projected to grow as the number of elderly citizens grows.[3][5]
The table below shows the total amount paid in Social Security benefits for the years 2006 through 2015. The total benefits listed below are broken into three main segments: benefits in current payment status (that is, individuals being paid as a source of income), retroactive payments (a lump sum paid out based on retirement age and when a retiree files for benefits), and lump sum death benefits. Although lump sum death benefits were highest in 2015 than in any of the 10 years prior, total retroactive payments were overall lower than any year since 2007. All dollar amounts below are in millions of dollars, meaning that $100,000 in the chart would be equal to $100,000,000,000.[5][6]
| OASDI Payments, 2006 to 2015 | ||||||
|---|---|---|---|---|---|---|
| Fiscal year | Total benefit paymentsa | Benefits in current payment status | Retroactive payments | Lump sum death payments | ||
| Total | AEROb | Other | ||||
| 2006 | $544,981 | $530,545 | $14,231 | $632 | $13,599 | $205 |
| 2007 | $576,752 | $562,740 | $13,809 | $655 | $13,155 | $203 |
| 2008 | $607,210 | $591,877 | $15,128 | $658 | $14,470 | $205 |
| 2009 | $659,565 | $642,314 | $17,049 | $724 | $16,325 | $201 |
| 2010 | $695,469 | $677,247 | $18,020 | $808 | $17,212 | $202 |
| 2011 | $719,515 | $702,421 | $16,889 | $733 | $16,155 | $204 |
| 2012 | $762,361 | $746,284 | $15,876 | $692 | $15,183 | $201 |
| 2013 | $802,633 | $788,220 | $14,212 | $684 | $13,528 | $201 |
| 2014 | $839,549 | $825,135 | $14,215 | $755 | $13,461 | $198 |
| 2015 | $876,577 | $862,183 | $14,185 | $845 | $13,340 | $208 |
| a Excludes reductions for unnegotiated checks and excludes payments (if any) for vocational rehabilitation services to disabled beneficiaries. b AERO is the Automatic Earnings Reappraisal Operation. AERO recomputes benefits for beneficiaries who had earnings after initial entitlement. Source: Social Security Administration, "Benefit composition" | ||||||
Full retirement age
In order for a retiree to receive full benefits under Social Security, he or she must reach what the Social Security Act defines as "retirement age." Commonly, this is believed to be age 65. However, the actual retirement age according to the law varies depending on the year a beneficiary or potential beneficiary was born. The following chart displays those years alongside the ages at which individuals would be eligible for full retirement.[7]
| Social Security full retirement ages | |
|---|---|
| Year | Full retirement age |
| 1937 or earlier | 65 years |
| 1938 | 65 years and 2 months |
| 1939 | 65 years and 4 months |
| 1940 | 65 years and 6 months |
| 1941 | 65 years and 8 months |
| 1942 | 65 years and 10 months |
| 1943 - 1954 | 66 years |
| 1955 | 66 years and 2 months |
| 1956 | 66 years and 4 months |
| 1957 | 66 years and 6 months |
| 1958 | 66 years and 8 months |
| 1959 | 66 years and 10 months |
| 1960 and later | 67 years |
| Source: Social Security Administration, "Social Security Fact Sheet" | |
Beneficiaries
Social Security has grown significantly since it was established in 1935. According to the Social Security Administration (SSA), there were about 59.5 million Social Security beneficiaries as of June 2015. About 42.6 million of those beneficiaries were retired workers and their dependents, 10.9 million were disabled persons and their dependents, and about 6.1 million were survivors of beneficiaries. This is a significant increase from numbers reported in 1970, when there were about 25.7 million total beneficiaries. At that time, about 16.6 million of those were retired workers and their dependents, 2.7 million were disabled workers and their beneficiaries, and about 6.5 million were survivors of beneficiaries. As this data shows, the number of total beneficiaries has more than doubled since 1970.[8]
The graph below, published by the SSA, shows the growth in number of beneficiaries by category for the years 1970 through 2014. For exact numbers, click here.
The Social Security Administration also publishes a monthly report, called a "statistical snapshot," of Social Security Beneficiary information. In a report published in November 2015, the Social Security Administration reported that there were about 65 million beneficiaries in the United States. Nearly 44 million of these were 65 years of age or older, while about 14.2 million were disabled (and under 65 years of age). There were also about 6.8 million beneficiaries who fell under a category called "Other," which encompassed early retirees and those receiving survivor benefits under the age of 65.[9]
Additionally, the report shows the number of individuals who solely receive Social Security benefits, those who receive solely Supplemental Security Income (SSI), and those who receive both simultaneously. The chart below contains the full report from November 2015.
Note: The numbers displayed should be multiplied by 1,000 (for instance, 50,000 would mean 50,000,000). Additionally, the report was for the month of October 2015, but was published in November.
| Social Security Beneficiaries, October 2015 | ||||
|---|---|---|---|---|
| Type of beneficiary | Total beneficiaries | Social Security only | SSI only | Social Security and SSI |
| All beneficiaries | 64,992 | 56,653 | 5,570 | 2,769 |
| Aged 65 or older | 43,947 | 41,788 | 957 | 1,201 |
| Disabled, under age 65a | 14,228 | 8,047 | 4,613 | 1,568 |
| Otherb | 6,817 | 6,817 | N/A | N/A |
| Source: Social Security Administration, "Monthly Statistical Snapshot, October 2015" aIncludes children receiving SSI because of their own disability. bSocial Security beneficiaries who are neither aged nor disabled (for example, early retirees, young survivors). | ||||
MassMutual survey
Massachusetts Mutual Life Insurance, a life insurance company based in Massachusetts, conducted a survey in 2015 that showed that a large percentage of citizens may not know several basic facts about the program. This survey was delivered in the form of a "true or false" quiz, where 10 basic Social Security questions were posed to 1,500 individuals. Only about 28 percent of individuals who took this quiz earned a "passing grade," although the cutoff for what equaled a "passing grade" was not specified. However, the survey analysis did reveal three specific areas where individuals were more likely to have knowledge gaps.[10]
- First, an individual does not need to be an American citizen to receive benefits. Three-quarters of those surveyed believed that only citizens could receive benefits, when in reality, any resident alien who has legally worked in the United States can potentially receive Social Security benefits as long as certain criteria are met.
- Second, 71 percent of those surveyed believed that full retirement age, or the age at which individuals can receive full benefits, is age 65. In actuality, full retirement age varies based on the year a person was born.
- Third, about 55 percent of those surveyed believed incorrectly that one could work while collecting full retirement benefits, regardless of age. In reality, if someone wants to receive benefits while working, he or she must submit to a process called the retirement earnings test, where one's Social Security earnings are combined with regular income and then examined. If those total earnings are above a certain limit, Social Security will be withheld and repaid over the rest of an individual's life once he or she enters full retirement.[10]
The MassMutual quiz can be found here.
Benefits
Payments
The amount an individual receives from Social Security varies based on two main factors: retirement age and calculations based on the individual's 35 highest-earning years prior to retirement. Higher historical earnings will equal higher Social Security payments, while lower earnings equal lower payments. An individual with fewer than 35 years of qualifying earnings will also have lower payments.[11]
The calculation used to determine final payments for beneficiaries follows a three step process:
- The beneficiary's earning reports are adjusted based on current wages (i.e., inflation).
- Earnings for the highest 35 years the beneficiary was paid are averaged and divided by the number of months in 35 years (420 months). The resulting number is called the Average Indexed Monthly Earnings (AIME).
- Another formula is applied to the AIME, producing the final payable benefit for full retirement age.[11]
If an individual does not have 35 years of earnings to report for Social Security purposes, zeroes are substituted in for any missing earnings. As a result, having fewer than 35 years of qualifying earning can significantly lower one's payable benefits.[11]
Supplemental Security Income
In addition to retirement benefits, Social Security also provides a benefit called Supplemental Security Income, or SSI. SSI benefits exist to provide additional income to disabled children or adults who have little or no income because of their disability. Individuals without a disability age 65 and up may also be eligible if those individuals meet income requirements. The Social Security Administration also uses an individual's other resources (such as housing and benefits from other programs) to help determine whether or not an individual is eligible for SSI benefits.[12]
The table below displays the number of SSI recipients by age group, as well as the total amount received by that age group and the average monthly benefits received per person. The "Total payments" listed below are listed in millions of dollars, meaning that the total $4,732 listed below was actually equal to $4,732,000,000.
| SSI recipients, October 2015 | ||||
|---|---|---|---|---|
| Age | Number | Percentage of total | Total payments (in millions)a | Average monthly benefits (in dollars)b |
| All recipients | 8,340,000 | 100% | $4,732 | $541.60 |
| Under 18 | 1,267,000 | 15.2% | $856 | $652.84 |
| 18–64 | 4,914,000 | 58.9% | $2,938 | $560.44 |
| 65 or older | 2,158,000 | 25.9% | $937 | $433.80 |
| Source: Social Security Administration, "Monthly Statistical Snapshot, October 2015" aIncludes retroactive payments. bExcludes retroactive payments. | ||||
Survivor benefits
If a worker who is earning Social Security dies, his or her family may be entitled to receive survivor benefits. These benefits are funded as a part of regular Social Security collections, meaning all a worker has to do to earn survivor benefits is to earn enough credits. Survivor benefit credits are earned based on income. For instance, in 2015, one credit was earned for every $1,220 in wages. A maximum of four credits can be earned in one year, and the number of credits needed to be eligible for survivor benefits are based on the age of the worker when he or she dies. Benefits can be paid to the children or spouse of a deceased worker as long as he or she has earned at least six credits in the three years prior to the worker's death.[13][14]
Benefits statistics
The Social Security Administration publishes a report each month that details benefits and beneficiaries. The table below breaks down the total number of beneficiaries by benefit received. The table is separated into two main sections: Old age and survivors insurance, and disability insurance. Those sections are bolded in the table. The non-bolded categories fall under one of the larger sections. For instance, there were 49,017,000 old age and survivors insurance beneficiaries in October 2015. About 42,940,000 of those beneficiaries received retirement benefits. The percentages in each section refer to the total number of beneficiaries, and because beneficiaries may receive multiple types of benefits, these percentages will not be equal to 100 percent.[9]
Note: The numbers displayed, with the exception of average monthly benefits, should be multiplied by 1,000 (for instance, 50,000 would mean 50,000,000). Additionally, the report was for the month of October 2015, but was published in November.
| Beneficiaries by benefit type, October 2015 | ||||
|---|---|---|---|---|
| Type of beneficiary | Number | Percentage of total | Total monthly benefits | Average monthly benefits |
| Total | 59,833 | 100% | $73,315 | $1,225.34 |
| Old Age and Survivors Insurance | 49,017 | 81.9% | $62,263 | $1,270.23 |
| Retirement benefits | 42,940 | 71.8% | $55,504 | $1,292.59 |
| Retired workers | 39,968 | 66.8% | $53,489 | $1,338.27 |
| Spouses of retired workers | 2,330 | 3.9% | $1,599 | $686.21 |
| Children of retired workers | 642 | 1.1% | $417 | $649.15 |
| Survivor benefits | 6,077 | 10.2% | $6,759 | $1,112.20 |
| Children of deceased workers | 1,877 | 3.1% | $1,559 | $830.78 |
| Widowed mothers and fathers | 140 | 0.2% | $132 | $939.04 |
| Nondisabled widow(er)s | 3,800 | 6.4% | $4,880 | $1,284.39 |
| Disabled widow(er)s | 260 | 0.4% | $187 | $719.66 |
| Parents of deceased workers | 1 | (L) | $1 | $1,127.64 |
| Disability Insurance | 10,815 | 18.1% | $11,052 | $1,021.87 |
| Disabled workers | 8,923 | 14.9% | $10,394 | $1,164.92 |
| Spouses of disabled workers | 143 | 0.2% | $46 | $317.86 |
| Children of disabled workers | 1,749 | 2.9% | $612 | $349.81 |
| Source: Social Security Administration, "Monthly Statistical Snapshot, October 2015" (L): Indicates less than 0.05 percent of total. | ||||
Recent news
The link below is to the most recent stories in a Google news search for the terms Social Security. These results are automatically generated from Google. Ballotpedia does not curate or endorse these articles.
See also
- Social Security Act of 1935
- Centers for Medicare and Medicaid Services
- Healthcare policy in the United States
External links
Footnotes
- ↑ Social Security Administration, "Chronology," accessed October 20, 2015
- ↑ Social Security Administration, "Social Security Basic Facts", accessed October 22, 2015
- ↑ 3.0 3.1 Social Security Administration, "Fast facts and figures about Social Security: 2015," accessed January 11, 2016
- ↑ Investopedia, "FICA," accessed October 21, 2015
- ↑ 5.0 5.1 Social Security Administration, "Benefit composition," accessed January 11, 2016
- ↑ Forbes, "Don't let Social Security cut your retirement benefit with retroactive benefits against your will," accessed January 11, 2016
- ↑ Social Security Administration, "Social Security Fact Sheet," accessed October 30, 2015
- ↑ Social Security Administration, "Social Security Beneficiary Statistics," accessed December 7, 2015
- ↑ 9.0 9.1 Social Security Administration, "Monthly Statistical Snapshot, October 2015," accessed December 7, 2015
- ↑ 10.0 10.1 MassMutual, "MassMutual Research: Survey shows concerning knowledge deficiency about Social Security benefits," accessed October 30, 2015
- ↑ 11.0 11.1 11.2 My retirement paycheck, "How are Social Security benefits calculated?" accessed November 2, 2015
- ↑ Social Security Administration, "Supplemental Security Income (SSI)," accessed December 8, 2015
- ↑ Social Security Administration, "Survivors benefits," accessed November 18, 2015
- ↑ Social Security Administration, "Survivors planner: Planning for your survivors," accessed November 18, 2015
