Continue Reading Below
At the time, the U.S. was in the midst of the Great Depression. The Social Security Act was easily passed by both houses of Congress, which – in addition to a number of general welfare provisions – created the social insurance program designed to pay workers an income into their retirement.
Social Security is different than traditional welfare programs because workers pay into a joint fund throughout their careers through payroll tax contributions.
The first taxes were collected in 1937, and the monthly benefits were paid beginning in 1942, according to the Social Security Administration (SSA).
The SSA also noted that lump sum benefit payments were made between 1937 and 1940 – these payments provided compensation for those who contributed but would not participate long enough to be vested for monthly benefits.
The average lump sum payment made during that time was $58.06 – but the smallest payment ever made was 5 cents.
The first monthly check – for $22.54 – was issued to a Vermont resident, who retired in 1939. Ida May Fuller was a legal secretary, who lived to be 100 years old.
Here’s a look at the program as it stands today:
Who is eligible?
Social Security is based on contributions workers make into the system throughout their careers.
Typically, if you’ve worked for 10 years, you are eligible for some sort of benefit.
The longer a worker pays into the system, the larger their monthly benefit will be upon retirement.
Social Security benefits
Workers become eligible to begin collecting Social Security benefits at the age of 62.
However, for those who claim before the age of 65, there will be a reduction of benefits. The reduction for those who claim at 62 is 25 percent, 20 percent for those that claim at 63, 13.3 percent at age 64 and 6.7 percent at 65.
People who delay collecting until age 70 can boost their lifetime income stream by as much as 32 percent.
How many people receive benefits?
According to the Social Security Administration, more than 68 million people collected Social Security, Supplemental Security Income, or both, as of June. Of those people, about 48.7 million were aged 65 or older.
What are people paid per month?
The average monthly benefit for all retired workers after the 2.8 percent cost-of-living adjustment in 2019 is $1,461, according to the SSA. That compares with $1,422 last year.
The maximum Social Security benefit for a worker retiring at full retirement age in 2019 is $2,861 per month.
How much does the government pay?
Social Security accounted for 24 percent of the federal budget in 2017 – or $945 billion, according to the Center on Budget and Policy Priorities.
As a share of GDP, the annual cost of Social Security will increase to 5.9 percent by 2039 – up from 4.9 percent last year.
A pending shortfall…
The annual Social Security and Medicare trustees report released this year said total costs of the program, including both the old age and disability insurance programs, will exceed income in 2020 for the first time since 1982.
The program’s trustees forecast that Social Security will not be able to pay full benefits by 2035 – at that time 80 percent of benefits will be payable.
In 2018, the trustees forecast that 100 percent of benefits would be covered through 2034, meaning the trust fund gained an extra year before expected depletion. However, the trustees are still urging lawmakers to take action sooner than later.
“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote.