As of September, more than 61 million Americans were receiving a monthly stipend from Social Security -- and more than 66 million if we include those receiving funds from the Social Security Supplemental Income program. For many of these folks, Social Security isn't just added income -- it's a way of life. More than 3 out of 5 elderly seniors counts on their monthly benefit to provide at least half of their income, while a majority of working Americans (90% or more) are covered, to some degree, by Social Security's disability and/or survivors insurance. In many respects, it's America's most important social program.
Eight key Social Security events
Most people have no clue about how Social Security came to be such an important puzzle piece for seniors and working Americans. Today, we'll look at the eight most pivotal dates in Social Security's history that helped shape some of the key features you're familiar with today.
Aug. 14, 1935: The Social Security Act is signed into law
The hallmark event for the program occurred in August 1935, when then-President Franklin D. Roosevelt signed the Social Security Act into law, which established two provisions to provide old-age security. First, it provided federal aid to the states in order to divvy out pensions to elderly folks in need. Second, and what you're probably most familiar with, it provided old-age benefits to retired workers. This second provision was designed as a preventive measure to ensure that elderly hardworking Americans were assured a life income after many decades of employment.
Beginning on Jan. 1, 1937, working Americans began accruing lifetime work credits toward old-age insurance benefits. Today, you'll need 40 lifetime credits in order to qualify for retired worker benefits, with a maximum of four being earned in a year. In 2018, every $1,320 in earned income equates to a lifetime work credit. In other words, working part-time for a decade should be enough to qualify you for at least some retirement benefits.
Aug. 10, 1939: Social Security benefits are broadened to include dependents and survivors
Initially, Social Security was just for retired workers. However, it didn't take long for President Roosevelt to broaden the scope of the program. In August 1939, Roosevelt expanded Social Security also to include the dependents and survivors of primary workers.
Today, survivor benefits covers just shy of 6 million people, doling out an average of $1,129 a month. Meanwhile, roughly 3 million people are currently receiving retirement benefits as dependents. This includes 2.37 million spouses of retired workers and 664,000 children of retired workers. Together, survivors and dependents of retired workers account for 1 out of every 7 beneficiaries.
Aug. 1, 1956: Amendments are introduced to provide benefits to the disabled
Believe it or not, it took more than 20 years after it was first signed into law for Social Security to be broadened to include the disabled. In August 1956, President Dwight D. Eisenhower signed amendments into law that provided monthly benefits to permanently and totally disabled workers between the ages of 50 and 64, as well as for adult children of deceased or retired workers who were disabled before age 18.
You'll note that the disability age requirements then were considerably stricter than they are now. Nevertheless, this became the first step to ensuring that the disabled would have some form of monthly income if they couldn't work. Today, more than 10.4 million Americans receive disability insurance income, which includes 8.7 million disabled workers and 1.7 million children and spouses of disabled workers.
Jun. 30, 1961: Amendments allow workers to elect a reduced retirement benefit at age 62
Though John F. Kennedy wouldn't live through his full term due to his assassination in 1963, he still managed to have a major impact on the Social Security program. In June of 1961, his inauguration year, he signed the Social Security Amendments of 1961 into law. The key component of these amendments was a new rule allowing workers to begin taking benefits as early as age 62, with a catch: If they elect to take benefits early, they'll receive a reduced retirement benefit.
Today, eligible Americans have the option of signing up for Social Security benefits at age 62, or any point thereafter. They receive 100% of their benefit when they reach full retirement age, which is based on their birth year. Retire at any point before full retirement age, and the monthly payout is permanently reduced. If they wait to enroll until after their full retirement age, they can actually receive more than 100%. About 60% of seniors enroll between ages 62 and 64, thusly accepting a permanent reduction in their monthly retirement benefit.
Jul. 1, 1972: A new law is signed, establishing an annual COLA beginning in 1975
The next game-changing event occurred in July 1972, when then-President Richard Nixon signed P.L. 92-336 into law. (Rolls off the tongue, right?) This law authorized an ad-hoc 20% increase to Social Security's cost-of-living adjustment (COLA), effective Sept. 1972, and would set the stage for issuing automatic annual COLAs based on inflation beginning in 1975. Think of COLA as the inflation-based "raise" that beneficiaries receive most years.
The mid-October inflation data release from the Bureau of Labor Statistics and the subsequent annual COLA announcement from the Social Security Administration are probably the most eagerly awaited news by Social Security beneficiaries each year. Next year, beneficiaries are set to receive a 2% raise, albeit not everyone will necessarily see a boost in their monthly payouts.
Oct. 30, 1972: The Social Security Amendments of 1972 creates the SSI program
Less than four months after establishing an inflation-adjusted COLA for Social Security, President Nixon made another major change by signing the Social Security Amendments of 1972 into law. These amendments led to the creation of the Supplement Security Income (SSI) program, which is what provides benefits to disabled adults and children who have limited income and resources. Elderly adults 65 and older who aren't disabled, but who meet certain financial limits, can qualify for SSI, as well.
As of September 2017, 8.2 million people were receiving SSI, with 1.2 million below the age of 18, 2.2 million 65 or older, and the remaining 4.8 million between ages 18 and 64. The average SSI recipient is receiving about $543 a month.
April 20, 1983: The Social Security Amendments of 1983 are signed into law
The last really major overhaul of Social Security occurred in April of 1983 when President Ronald Reagan signed the Social Security Amendments of 1983 into law. These amendments wound up making two major changes to Social Security that still are there today.
First, it created the taxation of Social Security benefits. Single tax filers who make $25,000 or more annually, and couples filing jointly with $32,000 or more in income, could have half of their Social Security benefits exposed to federal income tax. In 1993, under the Clinton administration, a second tier was added that exposed 85% of a single filer's Social Security benefits if he or she made more than $34,000, or in excess of $44,000 for couples filing jointly.
The second change included a gradual increase to the full retirement age from 65 to 67 over four decades. The move was made to account for increased longevity, and to encourage workers to wait longer to receive Social Security benefits. By 2022, all workers born in or after 1960 will have a full retirement age of 67.
April 7, 2000: The Retirement Earnings Test is eliminated for those at, or beyond, full retirement age
Last, but certainly not least, Bill Clinton, nearing the end of his presidency, signed into law a bill that eliminated the Retirement Earnings Test (RET) for beneficiaries at or over their full retirement age. The RET withholds benefits if your annual earnings exceed a certain level. This move ensured that seniors who'd reached their full retirement age would get to keep every cent of their Social Security income, upfront at least. They could still wind up owing federal tax on a portion of their benefits.
For beneficiaries who haven't reached their full retirement age (and who won't reach it in 2018), the Social Security Administration (SSA) will withhold $1 in benefits for every $2 in earned income beyond $17,040. For those who'll reach full retirement age in 2018, but haven't done so yet, the SSA will withhold $1 in benefits for every $3 in earned income beyond $45,360. The good news is you won't lose the benefits that are withheld by the SSA -- you'll get them back in the form of a higher monthly payout once you reach your full retirement age. However, the RET can prevent double-dipping with a working wage and Social Security income before reaching your full retirement age.