Social Security Facts

President Franklin Delano Roosevelt signed the Social Security Act on August 14, 1935, which established a basic compact between generations: younger workers would contribute payroll taxes, and retired workers would have a more secure retirement. Presidents from Dwight Eisenhower to Ronald Reagan have signed landmark Social Security reforms to expand Social Security to provide disability insurance (1954), index Social Security benefits so people would not become poorer as they grew older (1972), and reform Social Security to add decades to its life (1983).

What follows are some facts about Social Security that may surprise you. Read the facts. Then decide again whether Social Security is a valuable “safety net” in America.

About half of the elderly have incomes that, without Social Security, leave them below the poverty line. Social Security lifts 13 million elderly Americans above the poverty line.

Without Social Security benefits 46.8 percent of Americans aged 65 and older would have incomes below the poverty line. With Social Security benefits, only 8.7 percent of the elderly do. Some 13 million elderly Americans are lifted out of poverty by Social Security benefits.

Social Security does more to reduce poverty among children than any other government program.

In 2002, one million children under age 18 were lifted above the poverty line by Social Security benefits. No other government program except the Earned Income Tax Credit (EITC) lifts more children out of poverty. In addition, if a broader poverty alleviation measure is used that includes reductions in the severity of poverty (for those who remain poor), then Social Security does more to alleviate poverty among children than any other government program, including the EITC

Social Security is more than just a retirement program: one-third of Social Security beneficiaries receive survivors’ benefits or disability insurance benefits. 10 million beneficiaries are adults below the age of 65, and 4 million are children.

Social Security is more than just a retirement program. Of the 48 million beneficiaries in July 2005, 6.6 million received survivors’ benefits and 8.2 million received disability benefits. In total, 10.3 million adults below the age of 65 and 3.9 million children received Social Security benefits. The Social Security Administration’s Office of the Chief Actuary has estimated that an illustrative family whose breadwinner dies at a young age can receive a total of $403,000 in survivors’ benefits, while an illustrative family whose breadwinner becomes permanently disabled can receive a lifetime benefit of $353,000 from Social Security disability insurance. The Social Security Administration estimates that almost one of every three young workers will become disabled before reaching retirement age.

For two-thirds of the elderly, Social Security provides the majority of their income. For one-third of the elderly, it provides nearly all of their income.

In 2002, Social Security provided 50 percent or more of the income of 66 percent of elderly people (those ages 65 or older). Social Security provided 90 percent or more of the income of 34 percent of elderly people. For 22 percent of seniors, Social Security is the sole source of retirement income.

Social Security provides benefits to 48 million Americans, with the average beneficiary receiving $10,500 per year.

In July 2005, Social Security provided benefits to 48.1 million Americans, with benefits averaging $876.70 a month, or $10,500 annually.

Social Security is especially beneficial for women.

Some 57 percent of adult beneficiaries are women. Women pay 39 percent of Social Security payroll taxes and receive 50 percent of Social Security benefits (This includes survivor and disability benefits as well as retirement benefits). Women benefit disproportionately from a number of the program’s features, including its inflation-protected benefits (because women live longer), its progressive formula for calculating benefits (because women tend to have lower incomes), and its benefits for non-working spouses and survivors. Certain reforms could make Social Security even more effective for women, particularly widows.

Social Security is particularly important for African Americans.

African Americans benefit from Social Security’s progressive benefit formula and from its disability and survivor benefits. A wide range of studies, both by respected government agencies and by leading private scholars, have found that these benefits more than make up for the fact that African Americans have a lower average life expectancy. African Americans make up 13 percent of the population but represent 17 percent of those receiving Social Security disability benefits and 21 percent of the children who receive Social Security benefits.

Social Security provides good benefits for Hispanics.

Hispanics benefit substantially from the design of Social Security because, on average, they have lower incomes, a higher incidence of disability, more children per family, and longer life expectancies. One study by Harvard economists Jeffrey Liebman and Martin Feldstein found that Hispanics get a Social Security rate of return that is 35 to 60 percent higher than the rate of return for the general population. In addition, Hispanics are less likely to have access to employer-sponsored pension plans and consequently are much more reliant on Social Security for income in retirement. This should be an important motivation for improving Social Security for Hispanics, especially in terms of coverage issues. It is important to remember, during this time of so much pressure on illegal aliens that Social Security benefits are only available to legal citizens and workers.

Social Security provides a progressive benefit that keeps up with increases in the cost of living.

Social Security retirement benefits are calculated based on a progressive benefit formula. For the first dollar of average lifetime income, you get a Social Security benefit of $0.90. At higher incomes, a $1 increase in average lifetime income adds only $0.15 to annual benefits. Once benefits are computed, they are automatically adjusted for inflation annually, helping to ensure that people do not fall into poverty as they age. In contrast, most annuities sold by private insurance companies are very expensive and do not increase with inflation.

This last fact may surprise you. Social Security is an extremely efficient program, with administrative costs equaling only 0.6 percent of retirement and survivors benefits.

Administrative costs account for only 0.6 percent of total Social Security retirement and survivors benefit payments. According to the most optimistic estimates, even private accounts plans with very limited choices and services would have administrative costs more than ten times as high. The Office of the Chief Actuary of the Social Security Administration generally assumes that with private accounts that offer limited choices and services, administrative costs would ultimately consume about 0.3 percent of account assets each year. At that rate, administrative expenses would ultimately eat up about 7 percent of a worker’s retirement benefit, more than ten times as much as the administrative costs under the current Social Security system.

There is a wealth of information regarding Social Security and it’s past and future. You can discover some very eye-opening information at the Economic Policy Institute http://www.epi.org/content.cfm/issueguide_socialsecurity there you can download a PDF of the entire Social Security Facts guide from the Institute and read about many other interesting topics the Institute pursues.