For better or worse, Social Security is a vital program for our nation's retired workforce. As of February, according to the Social Security Administration's (SSA) monthly snapshot, more than 61.1 million people were receiving a benefit, and this figure is only expected to grow as baby boomers age and continue to leave the workforce.
Social Security is also pretty darn complicated and difficult for many working and older Americans to fully understand. With this is mind, I thought it might be worthwhile to take a closer look at 30 of the most stunning Social Security statistics in the hope of better explaining Social Security's importance and how it works, from a visual perspective.
1. 41.51 million
While Social Security is paying out benefits to more than 61 million people each month, its primary task, and why it was conceived in the mid-1930s, is to provide income to retired workers. As of February 2017, 41.51 million, two-thirds of those 61 million beneficiaries, were retired workers.
2. 40 credits
To qualify for Social Security benefits when you retire, you need to have collected 40 lifetime work credits. You can earn a maximum of four credits per year, meaning you'll have had to have worked at least 10 years during your lifetime to qualify based on your own work and earnings history.
What does it take to qualify for a lifetime work credit? Though it changes each year, often on par with inflation, a work credit can be earned in 2017 for each $1,300 in earned income. In other words, $5,200 in earned income in 2017 will max out your work credits for the year.
Social Security's importance can't be understated. SSA data shows that 61% of retired workers counts on their benefits to comprise at least half of their monthly income. This includes a whopping 71% of unmarried elderly individuals, and 48% of married elderly adults.
As of February 2017, according to the SSA's data, the average retired worker was bringing home $1,363.66 each month, or $16,363.92 per year. That's only about 38% ahead of the recognized federal poverty level in 2017.
However, Social Security isn't just for retirees. It's there to provide protection to spouses, children, and even parents to a lesser extent, of qualifying workers who pass away. A little more than 6 million survivors were receiving benefits as of February 2017 that averaged $1,123.12 per month.
Additionally, Social Security is a program designed to protect a majority of the working population should they become permanently disabled. Some 10.59 million people were receiving an average benefit of $1,032.25 a month as of February 2017.
According to data from the SSA in 2014, 10% of all beneficiaries were living below the poverty line based on their income. Another 5.2% were considered to be "near poor" and earning between 100% and 125% of the federal poverty level. While Social Security income has unquestionably helped keep millions of seniors out of poverty, it's still not enough to lift all retired workers above the poverty level.
9. 35 years
Ultimately, three factors decide what you'll be paid on a monthly basis. Two of them (we'll get to the third in a moment) are interconnected: your earnings history and the number of years you worked. The SSA takes into account your 35 highest-earning years when calculating your monthly benefit. For each year less than 35 that you worked, a zero will be averaged in, thusly dragging down your payout.
10. 66 years, 2 months
The third factor that affects your payout is your full retirement age, or FRA. Your FRA is determined by your birth year, and it represents the age at which the SSA deems you eligible to receive 100% of your monthly benefit. For those born in 1955 and newly eligible to receive Social Security, your FRA is 66 years and two months.
The SSA offers a pretty big incentive to seniors who are patient. For each year that an individual holds off on filing for benefits, their eventual payout grows by approximately 8%. Claim benefits before your FRA, and you could face up to a 25% to 30% permanent reduction in your monthly payout. Wait until after your FRA to file your claim, and your payout could be as much as 24% to 32% higher than what you'd receive at your full retirement age.
12. 62 years
The earliest age a person can begin receiving benefits from Social Security is age 62, although taking benefits as early as possible means accepting a reduction in your permanent payout. Earlier claims can often make sense for people in poor health, those who had a substantially lower lifetime income than their spouse, people who aren't in any way reliant on Social Security income (e.g., the wealthy), and those who can't find work or generate income.
Interestingly enough, approximately 60% of seniors, according to the Centers for Retirement Research at Boston College, file for benefits before hitting their full retirement age. That means more than 24 million of the current 41.51 million retired workers would be expected to receive a monthly payout that's below what they would have received had they waited until their full retirement age.
14. 70 years
Conversely, once an individual has reached age 70, his or her benefits will stop accruing on an annual basis. You could technically still hold off on filing a claim for Social Security until later, but there's no longer any incentive to wait. Healthy individuals, higher-earning spouses, and people with little to nothing saved often gain from waiting as long as possible to file for benefits.
15. 12 months
Should you regret your decision to file for benefits at an early age, or if you find work shortly after claiming benefits, you have options. Within the first 12 months of your claim, you can file Form SSA-521 with the SSA to undo your claim. As long as you pay back every cent you've received in benefits, it'll be as if your claim never happened, and your eventual payout can continue growing once again.
16. $16,920 and $44,880
This two-for-one data point summarizes the exempt income levels for early filers who claim benefits before hitting their full retirement age. If you're under your FRA, the SSA can withhold $1 in benefits for every $2 earned income above $16,920. If you're expected to hit your FRA later this year, the SSA can withhold $1 in benefits for every $3 in earned income above and beyond $44,880. After hitting your FRA, the SSA won't withhold a cent. In other words, claiming early doesn't mean you'll necessarily be able to pocket any extra money if you're still working. Also, you do get the withheld benefits back in the form of a higher monthly payment after you hit your FRA.
However, no matter what you earn or how many years you work, Social Security won't be paying out more than $2,687 per month at full retirement age. This maximum benefit does change on a year-to-year basis, more often than not with inflation.
The bulk of the money generated by Social Security is derived from its payroll taxes. In 2015, SSA data shows that 86.4% of the $920.2 billion in revenue came directly from payroll taxes. The collection of payroll taxes from working Americans also ensures that Social Security can never go bankrupt, although benefit cuts are a possibility.
Social Security's payroll tax is a 12.4% tax on earned income that's often split between employers and employees. That means the responsibility for most workers is 6.2% of what they earn, up to a certain dollar amount, which is discussed in the next point. Sorry, self-employed folks -- you'll owe the full 12.4%.
Payroll taxes are collected on earned income ranging from $0.01 all the way up to $127,200. This peak figure is known as the maximum taxable earnings amount, and it's adjusted every year to match the percentage increase in the Average Wage Index. The one exception is when no cost-of-living adjustment is passed along to seniors, whereby the maximum taxable earnings figure remains unchanged until the next positive cost-of-living increase.
21. $92 billion
Though a considerably smaller component of revenue next to payroll taxes, the interest earned on Social Security's more than $2.8 trillion in spare cash generated 10.1% of its revenue in 2015, or about $92 billion. The SSA primarily invests its spare cash in special issue bonds and to a lesser extent certificates of indebtedness.
22. $31 billion
The third and final component of revenue generation for Social Security is derived from the taxation of benefits. Individuals earning more than $25,000 annually, and joint filers with earned income above $32,000 are subject to having up to half of their Social Security benefits taxed by the federal government. In 2015, 3.4%, or $31 billion, of the revenue generated by the program came from the taxation of benefits.
23. 34 years
Interestingly enough, though, the income-taxation thresholds of $25,000 for individuals and $32,000 for couples hasn't been adjusted for inflation in 34 years. What was once designed to affect around 10% of senior households in 1983 is affecting 56% of households as of 2015, according to The Senior Citizens League.
24. $11.4 trillion
Despite being such a vital source of retirement income, Social Security is in trouble. The ongoing retirement of baby boomers and lengthening life expectancies are expected to result in an $11.4 trillion budgetary shortfall over the next 75 years.
According to the latest report from the Social Security Board of Trustees, the program is expected to bring in more revenue than it's paying out through 2019. By the year 2020, the Old-Age, Survivors, and Disability Insurance Trust will be paying out more in benefits than it's bringing in, reducing the trust's spare cash.
The real date seniors and future retirees are worried about is 2034. The trustees' report has suggested that the trust's entire $2.8 trillion in spare cash will be exhausted by 2034, necessitating major changes to keep the program solvent for future generations.
Though they are merely educated guesses from the best actuaries in the business, the trustees' report suggests that across-the-board benefit cuts of up to 21% may be needed to sustain payouts through the year 2090. That's a terrifying thought, with a majority of seniors dependent on Social Security for at least half of their income.
The trustees' report also lists the actuarial deficit of the program at 2.66% as of 2016. In plainer English, if payroll taxes were increased by 2.66%, or 1.33% for most workers who split their payroll tax liability down the middle with their employers, no benefit cut would presumably be needed for another 75 years.
29. 33 years
Just in case the threat of benefit cuts wasn't scary enough, Social Security's annual cost-of-living adjustments (COLA) have come in below the medical care inflation rate in 33 of the past 35 years. In fact, since the Great Recession. there have been three years where beneficiaries received no COLA. In October, seniors were rewarded with only a 0.3% increase in benefits for 2017, which is the lowest increase on record.
Finally, and on a slightly different note, the Social Security Administration is actually a very well-run and cost-efficient agency. Data has shown that of the $920.2 billion collected in revenue in 2015, just 0.7% was used for administrative purposes to keep the agency running.