For tens of millions of Americans, there is no social program that's more important than Social Security. For more than 75 years it has been a program that's been heavily leaned on by seniors, and even those who aren't of traditional retirement age.
Yet, truth be told, the public's knowledge surrounding Social Security is often lacking. A 10-question true-false quiz from MassMutual Financial Group in 2015 found that just 28% of the more than 1,500 respondents who took the quiz received a passing grade (defined as answering 7 out of 10 questions, or more, correctly). Just one person got all 10 questions correct -- and even one wrong answer could equate to leaving a lot of money on the table come retirement.
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A comprehensive list of important Social Security facts
With that being said, here are 40 comprehensive Social Security facts that working Americans, pre-retirees, and even those currently receiving Social Security benefits should be aware of.
1. Social Security was originally designed to provide a financial foundation for low-income workers during retirement, but protections for the disabled and survivors were added later.
2. The average 65-year-old will live a little over 20 years, suggesting Social Security's importance in providing that financial foundation is only growing.
3. You aren't entitled to Social Security benefits -- you have to earn them. A total of 40 work credits guarantees you some degree of benefits from the program.
4. A maximum of four lifetime work credits can be earned per year. You're given these credits based on the income you earn during the year. In 2018, you'll receive a work credit for every $1,320 in income you earn. Thus, $5,280 in earned income this year will max out the number of credits you can earn this year.
5. Not everyone will reach 40 work credits, but they can still be covered. For instance, there's a staggered work-credit scale for disabled persons, allowing them to qualify with far fewer than 40 credits. Additionally, survivor benefits may allow a spouse to qualify for benefits without having worked a day in his or her life.
6. Approximately 90% of workers between the ages of 21 and 64 are protected in the event of a long-term disability. According to the Social Security Administration, over a quarter of today's 20-year-olds will become disabled before reaching their 67th birthday (the full retirement age for anyone born in or after 1960).
7. Additionally, 96% of today's working Americans between the ages of 20 and 49 have survivors insurance protection for their spouse and/or young children in the event of an untimely death.
8. The average retired worker was receiving $1,375.29 a month as of November 2017. That may not sound like a lot, but it's been credited with keeping millions of elderly Americans out of poverty.
9. Some 42.4 million retired workers were receiving a monthly benefit as of November 2017, but this represents just 68.5% of all payouts. This means 31.5% of Social Security beneficiaries (19.47 million) aren't retired workers.
10. Traditionally, retired workers are eligible to begin receiving benefits at age 62. However, disabled workers, spouses, and children are able to receive benefits under certain circumstances at an earlier age.
11. Your full retirement age is the age where the Social Security Administration deems you eligible to receive 100% of your benefit. It's determined by your birth year. In 2018, the full retirement age is 66 years and four months. By 2022, it'll top out at 67 years.
12. Waiting is key. Beginning at age 62 and ending at age 70, your benefit grows by approximately 8% per year for each year that you hold off on enrolling. All things being equal (income, work history, and birth year), claiming at age 70 instead of age 62 may result in a 76% higher monthly payout.
13. Around 60% of retired workers claim benefits between ages 62 and 64, thus accepting a permanent reduction in their monthly payout in the process. Meanwhile, just 3% wait until age 70 to claim benefits, maximizing what they'll receive each month.
14. Social Security has a mulligan built in known as Form SSA-521. If you regret taking benefits early, you can undo your application within the first 12 months and repay every cent you've received. Doing so, assuming you're approved by the Social Security Administration, will undo your filing and allow your benefits to grow at roughly 8% a year once more.
15. The Social Security Administration suggests that the program is designed to replace, on average, about 40% of a worker's wages during retirement. This figure might be a bit lower for a higher-earning individual, or higher for a lower-income worker.
16. As of 2016, 62% of Social Security recipients leaned on the program for half of their monthly income, with 34% deriving 90% or more of their income from their monthly stipend.
17. Social Security benefits do indeed have a monthly cap. At full retirement age in 2018, the maximum monthly payout is $2,788. You can technically earn more by waiting to claim until after your full retirement age.
18. You can receive benefits while you work. However, the retirement earnings test could come into play if you haven't reach your full retirement age. If that's the case, the Social Security Administration can withhold a portion, or all, of your benefits. But don't worry, these benefits aren't lost forever. You'll get them back in the form of a higher payment once you reach full retirement age.
19. Ex-spouses can lay claim to a Social Security benefit based on your work history as long, as you were married for at least 10 years. Once again, don't worry, as it won't impact the benefit you or a current spouse will be receiving.
20. Social Security is primarily funded by the payroll tax. In 2016, it accounted for 87.3% of the $957.5 billion collected by the program.
21. The payroll tax is a 12.4% tax on earned income between $0.01 and $128,400, as of 2018. Any income beyond $128,400 is exempt from Social Security's payroll tax. This means around 90% of working Americans pay into Social Security on every dollar they earn.
22. Most workers won't pay the full payroll tax of 12.4%. If you're employed by someone else, your employer is responsible for half of your payroll tax, or 6.2%, with the worker picking up the other half (6.2%). The self-employed, however, foot the full 12.4% tax up to $128,400.
23. Social Security benefits are also taxable, as of the amendments of 1983. Individuals earning more than $25,000 annually, and couples filing jointly with more than $32,000 in income, could have half of their benefits exposed to federal income tax.
24. It's been almost 35 years since the taxation of benefits was implemented, yet these figures have never been adjusted for inflation. What once impacted around 1 in 10 senior households in 1984 now affects around 56%, as of 2015, according to The Senior Citizens League.
25. A second tax tier was added in 1993 under the Clinton administration. Single taxpayers with more than $34,000 in earned income, and couples filing jointly with over $44,000 in earned income, could have 85% of their benefits exposed to federal income tax.
26. 13 states also tax Social Security benefits. Four of them -- Minnesota, North Dakota, Vermont, and West Virginia -- mirror the federal tax schedule, while nine others -- Colorado, New Mexico, Nebraska, Utah, Kansas, Missouri, Connecticut, Montana, and Rhode Island -- tax benefits with varying degrees of income exemptions.
27. Social Security generated $88.4 billion in revenue in 2016 from interest income earned off of its nearly $2.9 trillion in asset reserves. These asset reserves are primarily invested in special issue bonds, and to a lesser extent certificates of indebtedness.
28. The average yield on Social Security's nearly $2.9 trillion in invested assets is a mere 2.9%. Blame the Fed's seven years of record-low interest rates as a reason for low yields on its asset reserves.
29. Social Security's inflationary tether is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The average reading from the third quarter of the previous year serves as the baseline, while the average reading from the current year acts as the comparison. If the prices for goods and services, as measured by the CPI-W, rises, then beneficiaries get a "raise" commensurate with the percentage increase, rounded to the nearest 0.1%. If the CPI-W falls year-over-year, benefits remain unchanged. They can never fall due to deflation.
30. The CPI-W measures the spending habits of working Americans; thus, it tends to overemphasize apparel, food, entertainment, transportation, and educational spending, and deemphasizes housing and medical care expenditures, which tend to matter most to seniors.
31. Social Security's cost-of-living adjustment has been 0% in three of the past eight years, and 0.3% for the recently ended year (the lowest increase on record). Not shockingly, The Senior Citizens League estimates that the purchasing power of Social Security dollars has dropped by 30% since 2000.
32. The Social Security Administration is incredibly efficient. It usually spends in the neighborhood of $5 billion to $6 billion a year, or roughly 0.6% of the total revenue collected.
33. Social Security is in trouble. According to the Social Security Board of Trustees, it'll begin paying out more in benefits than it collects in revenue by 2022, ultimately leading to a complete exhaustion of its asset reserves by 2034.
34. Social Security cannot go bankrupt, thanks to the payroll tax, but its current payout schedule is believed to be unsustainable. If Congress is unable to come to an amicable solution to raise additional revenue, a cut in benefits of up to 23% may be needed to sustain payouts through the year 2091.
35. The Board of Trustees estimates the actual deficit over the next 75 years at 2.83%. In other words, Social Security's payroll tax needs to rise by 2.83% today (12.4% + 2.83% = 15.23%) in order to cover the estimated $12.5 trillion budget shortfall.
36. The ongoing retirement of baby boomers is often credited with being a major source of Social Security's imminent issues. The workers-to-beneficiary ratio is expected to fall to 2.2-to-1 from 2.8-to-1 between 2017 and 2035.
37. However, don't just blame boomers for being born. Life expectancies have risen by nine years since 1960, and the rich are living significantly longer than lower-income folks because of their ease of access to preventative medical care. This income inequality is allowing the rich to receive a high monthly payout for a long period of time.
38. Democrats propose lifting or removing the maximum taxable earnings cap, requiring the well-to-do to pay more into the program. Doing so would eliminate an estimated $12.5 trillion budget shortfall, but provide no added benefits to the rich during retirement.
39. Republicans prefer raising the full retirement age to account for increased longevity. It wouldn't adjust the payouts of current retirees, but future generations would be adversely impacted by having to wait longer to reach full retirement age, or by having to accept a steeper permanent reduction to their monthly payout by claiming early. This, too, would eliminate the $12.5 trillion budget shortfall.
40. Surveys have consistently shown that the public prefers raising taxes on the wealthy as a primary fix, with increasing the full retirement age a distant second choice.
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