There's perhaps no social program in this country that's more important to the financial well-being of American workers and retirees than Social Security. According to the Center on Budget and Policy Priorities, the guaranteed payout that the tens of millions of eligible beneficiaries are receiving is keeping more than 22 million people above the federal poverty line each year.
Social Security has you covered in a variety of ways
But what you might be overlooking is the sheer number of ways Social Security has your back. Whether you're a working American who's four decades away from reaching the eligible claiming age for Social Security, or an elderly retired worker who's received a benefit check for some time, Social Security is doing more for you than you probably realize.
1. Qualifying for benefits isn't too difficult
To begin with, while Social Security isn't an entitlement program -- i.e., you don't simply receive a benefit because you're an American citizen -- it's pretty simple to reach the 40 lifetime work credits needed to qualify for retired worker benefits.
In 2018, every $1,320 in earned income earns you one work credit. With a maximum of four work credits that can be earned per year, this means $5,280 in wage income will max out this year's work credits. Or, to put things another way, working part-time for 10 years should allow you to generate the work credits needed to qualify for a retired worker benefit when you retire. The bar is set pretty low to ensure that working Americans can reap the rewards of the program during retirement.
2. It provides a much-needed retired worker benefit
The most obvious positive for Social Security is what it does for aged beneficiaries. Of the noted 22 million-plus people who are being kept above the federal poverty line, 15.1 million are aged beneficiaries.
According to data from the Social Security Administration, 62% of current aged beneficiaries are leaning on the program to provide at least half of their monthly income, with 34% essentially reliant on Social Security for all of their income (90% to 100%). Although such heavy reliance isn't recommended, these seniors would probably be in big financial trouble without the guaranteed monthly check provided by Social Security.
3. You'll get disability protection, too
Of course, this program is about more than just putting money into the pockets of seniors. The Social Security Administration (SSA) finds that approximately 90% of today's workers aged 21 to 64 are covered by the program in the event of a long-term disability.
Don't think a long-term disability can happen to you? The SSA estimates that a little over 25% of today's 20-year-olds will become disabled prior to reaching their 67th birthday, which is their full retirement age. Plus, given that younger workers may not have had the opportunity to reach the 40 lifetime work credits needed to qualify, disability benefits are based on a staggered work-credit scale, allowing those with limited work history to still qualify for a benefit in many instances.
4. And let's not forget about survivor's insurance protection
In addition to providing long-term disability insurance protection, Social Security also covers 96% of all working Americans aged 20 to 49 with young children and/or a surviving spouse in the event of an untimely death.
Again, while you think it can't happen to you, SSA data shows that 1 in 8 20-year-olds aren't going to reach age 67. Almost 6 million Americans currently lean on this survivor benefit, many of whom are widows or widowers, and some of whom are the children of a deceased parent.
5. Your benefits are indexed to inflation
Another way Social Security has your back is by tethering benefits to an inflationary index known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. If the average third-quarter reading from the CPI-W in the current year increases from the average third-quarter reading from the previous year, then in the following year all Social Security beneficiaries receive a "raise" in percentage terms (rounded to the nearest 0.1%) that's commensurate with the difference.
While this index is far from perfect at passing along cost-of-living adjustments -- since it measure the spending habits of working-age urban and clerical workers, it tends to shortchange seniors who have markedly different spending habits -- it's better than failing to pass along any inflationary increases at all.
6. There's a built-in mulligan for those who regret their claiming decision
Social Security is also looking out for retired workers who might otherwise regret claiming benefits earlier than they would have liked.
Form SSA-521 (officially, Request for Withdrawal of Application) allows a retired worker to undo their benefits claim, with two catches. First, the request has to be submitted within 12 months of their current date of entitlement. And second, all benefits received will have to be repaid to the SSA. If your request is approved, then your claim will be undone and your benefits will continue to grow by 8% per year, until age 70. This mulligan can come in particularly handy for seniors who've been out work for a while, filed for Social Security benefits as a result, then landed a well-paying job not long after they began receiving benefits.
7. Social Security offers a death benefit to an eligible survivor
As noted, a surviving spouse or young children can qualify for a monthly survivor benefit in the event that a loved one passes away, but Social Security also provides a one-time lump-sum death benefit in the amount of $255.
According to the SSA, a deceased worker's spouse or children would qualify for the death benefit if the insured worker had worked at least six of the 13 quarters prior to their passing. If the death benefit is going to a surviving spouse, the SSA doesn't require an application for the death benefit to be filed. If, however, there is no spouse, then a surviving dependent child has up to two years to file an application for the lump-sum death benefit.
8. The administrative costs to run the program are very low
What better way to look out for the well-being of Americans than to ensure that the money flowing into the program goes to help those that it was designed to protect.
Last year, the Social Security Administration collected $996.6 billion in revenue and spent $952.5 billion. Just $6.5 billion in total costs were derived from administrative expenses, and the remainder of the funds was paid out to beneficiaries. This means that all of the SSA's representatives, offices, and other general expenses worked out to just 0.65% of the program's cash outflow. That's excellent cost management.
9. It's designed to last forever
Finally, but perhaps most importantly, Social Security, despite its many publicized problems, is in absolutely no danger of going bankrupt.
Social Security is funded three ways: 1) a 12.4% payroll tax on earned income of up to $128,400 (as of 2018); 2) interest income on its $2.9 trillion in asset reserves; and 3) the taxation of Social Security benefits. Even if the program's $2.9 trillion in excess cash is completely depleted by 2034, as the latest Trustees report has projected, the program will continue to generate revenue from its payroll tax and the taxation of benefits. As long as Americans keep working, and Congress doesn't change how the program is funded, Social Security could be around forever.
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