5 Incredible Social Security Facts That Young Adults May Not Know

Space may be the final frontier, but Social Security remains a vastly misunderstood social program that many young adults simply don't understand the importance of.

In 2011, CNN and ORC International conducted a poll (link opens a PDF file) of some 1,010 adults of varying ages to determine their opinion of Social Security as to whether it's been beneficial to them personally, and to determine what their opinion was of the social program going forward. The responses, as you might suspect, were heavily bifurcated between young adults and seniors over age 65.

Here were the results.

Would you say that the Social Security system has been good for you personally, bad for you personally, or has had no effect on you personally?

Opinion

18-34

35-49

50-64

65+

Good

20%

25%

41%

85%

Bad

18%

11%

10%

4%

No effect

62%

65%

48%

11%

Source: CNN/ORC International. Results may not add to 100% because of rounding.

Which of these statements do you think best describes the Social Security system -- it is in a state of crisis, it has major problems, it has minor problems, or it does not have any problems?

Opinion

18-34

35-49

50-64

65+

Crisis

20%

32%

21%

10%

Major problem

46%

50%

51%

47%

Minor problem

26%

16%

24%

35%

No problem

6%

1%

3%

8%

Source: CNN/ORC International. Results may not add to 100% because of rounding.

Most young adults (62%) claim to have had little effect from Social Security personally, since many view it as purely a means to getting paid when retired. This would somewhat be confirmed, with 85% of those aged 65 and older claiming that it's had a positive effect on them. When looking down the road, despite seeing little benefit now, young adults have a fairly dire view of Social Security as a whole (66% see the system as in crisis or having major problems) compared with just 57% of those aged 65 and older ,of which many are already receiving benefits.

That's why today, in an effort to improve Social Security awareness among young adults, I'm providing five incredible Social Security facts that you may not be aware of.

Fact No. 1: Social Security provides a lot more than just retiree benefits.
Most young adults think of Social Security as a system that they pay into only to reap the rewards of a somewhat steady monthly check once they retire. However, this year alone some 58 million people are expected to receive $816 billion worth Social Security disbursements, of which 30% will be for non-retirement benefits.

For one, Social Security provides long-term disability benefits for those under 65. According to statistics from the SSA, about one in four of today's 20-year-olds will become disabled before reaching the retirement age of 67.

It also provides benefits to the dependents of deceased workers. The SSA notes that 96% of today's workforce between ages 20 and 49 in 2011 had survivors insurance protection in place for their children and the surviving spouse that cares for the children. About 11% of the projected $816 billion will go to pay survivor benefits this year .

Fact No. 2: Social Security is financed through a dedicated payroll tax that you and your employer pay an equal share of.
You do pay your fair share of taxes to finance the Social Security trust, but so does your employer. With the rollback of the payroll tax exemption in 2013, you and your employer now each equally pay 6.2% of your annual salary, up to a taxable maximum of $113,700, into the Social Security Fund. If you're self-employed, you're in for double-duty, owing 12.4% of your annual pay.

Surprisingly, only 70% of the income collected by the Old-Age and Survivors Insurance Trust Fund (OASI) (which we collectively refer to as the Social Security Fund) comes from payroll taxes. The remaining OASI income is derived from interest earned on existing income in the fund, taxes levied on OASDI benefits, and reimbursements from the General Fund of the U.S. Treasury. 

Fact No. 3: Social Security is a major source of income for the elderly.
Over the past seven decades, the average life expectancy in the United States has risen by about six years. This means that people are living much longer past their retirement age and could, therefore, be very much in need of an income source. Enter Social Security benefits, stage left.

Based on statistics from June 2013, 88% of those over age 65 were receiving some form of Social Security benefits. That figure could be even higher if we pushed the age range to 70-plus, because the longer you wait to begin making withdrawals after age 62, the higher your monthly stipend will be!

For the elderly, Social Security benefits represent about 39% of their total income. For unmarried seniors, about three-quarters derive more than half of their monthly income from Social Security benefits. These income benefits may not seem beneficial to those of you in your 20s and 30s now, but they are clearly crucial to our aging population. Since life expectancies are only expected to move higher, the importance of Social Security income benefits with the elderly should only be expected to grow as well.

Fact No. 4: Social Security income is especially important for women.
This statement is not in any way a jab at women or a way of saying that men shouldn't care about Social Security. What I aim to point out here is the simple fact that women live longer than men. This means that ensuring the safety of long-term income benefits is especially important for women, given the importance of Social Security income for the elderly as we just discussed.

Also, as noted by the National Academy of Social Insurance, women tend to earn less than men for performing comparable jobs and tasks over their lifetime. The good news here is that lower income individuals who receive SSA benefits often see a smaller reduction in pay relative to their average annual salary compared with those who made an average that would equal the taxable maximum (currently $113,700). In other words, women are in for less of a paycheck shock when they begin receiving their Social Security disbursements compared to their male counterparts if the National Academy of Social Insurance is correct. 

Fact No. 5: The Social Security Trust Fund is currently on pace to be out of money by 2033.
Oh yeah, and one other tidbit: The current Social Security Fund income disbursement rate is unsustainable and should be completely out of money by 2033, or at least unable to sustain ongoing payouts to all eligible beneficiaries. 

As baby boomers begin to hit retirement age, we are going to see a dramatic increase in the number of retirees pulling out Social Security distributions to counteract what I imagine have been steep losses from the stock market crash in 2008-2009. The result is that the workers-to-retirees ratio is going to continue to drop and the system will simply not be bringing in enough income to support the amount it's obligated to pay out. In 1955 there were about eight workers for every beneficiary; today that figure is down to just 2.8 workers for every beneficiary and should drop further to just 2.1 workers per beneficiary by 2030.

Is there a genuine plan to fix the massive income shortfall? Not quite, but numerous ideas have been floated around, including higher levels of taxation.

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Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 19, 2013, at 10:27 PM, SLTom992 wrote:

    I had a major concussion the effect of which was to mess up my memory so that I can no longer work at my specialty. I was forced to retire just under 65.

    During the worst of my memory problems and before being properly treated I spend the better part of my bank account though luckily I couldn't get to my 401k.

    So I am almost entirely reliant upon Social Security and Medicare. I made a large amount of money while I was working and paid so much into SS that were I to live past 90 and draw only 1% interest rates on it I will still have money left that I put in.

    I am getting quite tired of the younger generation telling us that we're "sucking" off of the government when in fact they're sucking off of us by using the funds we put in to use as collateral to borrow more and more money for absolute garbage.

    The older generation isn't going to be put too much out, but the loose fingered spending of today's government is going to destroy any hope that the younger generations will have of ever retiring as we did. And watch the looks in their eyes as they age and realize that they've done it to themselves.

  • Report this Comment On October 19, 2013, at 10:28 PM, nswanberg wrote:

    When the trust fund runs out drop the current Social Security program and tax. Implement a program called Senior Income Security based on a 5% tax on all income. - personal, corporate, interest, dividend and capital gains. Let the Senior Income Security tax then be deducted as income from that category. The revenue will then be divided among the recipients. Some years recipients will get more benefits. Most years they will probably get less, however, we will have a pay as you go Senior Income Security program that will let the baby boomer population bulge pass through the system, provide some security for seniors, survivors and the disabled and we will have a program that will not bankrupt the nation. The major problem with such a common sense and sustainable program is that there is nothing more high income wage earners despise more than a tax they cannot evade.

  • Report this Comment On October 20, 2013, at 12:39 AM, gjsuhr wrote:

    "Is there a genuine plan to fix the massive income shortfall? Not quite, but numerous ideas have been floated around, including higher levels of taxation."

    And there is the problem. We have promised more than we can deliver....and it has been political suicide to try and address the issue.

  • Report this Comment On October 20, 2013, at 1:37 AM, chainfools wrote:

    the system(ss) is not dead as a concept. why would bush baby even attempt to incorporate it into the stock market? nice cash cow for a cash starved system that gets bailed in the furor of failure. the tax payer is the fool. we can no longer abide by the propaganda 'the ss system will die in 2033. since when does the government ever analyze programs in the long term. this is fraud and it is also fraud the ss is an entitlement program and should be cut down. the laws governing the ss program have been violated and that has to be renovated. if the pentagon can get funded for its enormous waste certainly we can fund a program that helps the elderly worker hero. a great country looks at the condition of its prisoners and its elderly. to think anything else as more important criteria you will enter the fool zone. carry on!!

  • Report this Comment On October 20, 2013, at 8:07 AM, DerAlteJunger wrote:

    A recent article described how the Social Security funding of benefits works. I repeat my reaction to:

    “Will You Get Your Social Security Check if the U.S. Defaults?”

    By Mark Miller | Reuters – Tue, Oct 8, 2013 12:53 PM EDT

    “Those funds can't be used for anything other than benefits.”

    BUT those funds ARE put to other use:

    “Every dollar of Social Security payroll tax revenue received by the U.S. Treasury Department is used to fund general operations.”

    AND --- some IOUs are issued:

    “Treasury then turns around and issues special interest-bearing Treasury notes to the SSTF matching the amount of payroll taxes it has received (and spent).”

    THEN:

    These IOUs in the “Social Security Trust Fund (SSTF)” are redeemed by “ issuing new general-issue Treasury bonds”. 

    That simply replaces one kind of “special” debt instrument with another “general” debt instrument.

    In other words, Social Security benefits are ultimately funded by increasing the national debt. 

    ““Social Security . . . a 'pay as you go' program . . .” 

    “Pay as you go” ---- funding benefits by increasing national debt? 

    I don't think so ---”Nothing could be further from the truth.”

  • Report this Comment On October 20, 2013, at 3:38 PM, Zebra365 wrote:

    The Social Security trust fund is a sham. There are no significant assets in it. The non-marketable Treasury securities that it holds are only promises by the government to tax later to fund the Social Security payments that will come due later.

    The US Treasury does not count those bonds as a liability because they are both a liability and an asset to the Treasury.

    You want a "trust fund" for your retirement? Just write yourself a check for $5 million and date it for the day you expect to retire. Now you're set.

    Think about it, if there really was a

    "trust fund" with trillions in it, why were Social Security checks threatened by the debt ceiling? Why couldn't they just write checks out of the trust fund?

    The answer is again, the trust funds are a sham.

    I can give you exact sources within the Treasury and the Bureau of the Public Debt that prove this, but most people won't look at them. So I don't bother anymore.

  • Report this Comment On December 14, 2013, at 12:50 PM, katsen wrote:

    I am currently receiving SSI Disability benefits at the age of 47. Does collecting these benefits impact my retirement benefits, as in, limiting my benefit collection time or is it a different entity from retirement age SSI? will it be 2 separate payments? I have worked from the age of 18 and have accrued the qualifying credits for collecting SSI benefits. Will it impact my collecting my husbands SSI if he dies before me?

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