Happy Birthday, Social Security

August 14, 2012 at 12:43 pm

Social Security marks its 77th birthday today.  This highly successful program pays benefits to 56 million Americans.  It’s the single most important source of income for its elderly beneficiaries, contributing on average two-thirds of income for recipients over age 65.  For more than one-third of them, Social Security constitutes 90 percent or more of income.  Reliance on Social Security is especially high among the oldest old — those who can no longer work and may have outlived their savings — and elderly blacks and Hispanics.  Without Social Security, nearly half of elderly Americans would live below the official poverty level; instead, fewer than 10 percent do (see graph).

But Social Security isn’t just for the elderly.  It protects workers who suffer a severe medical impairment, and children whose breadwinner dies, retires, or becomes disabled.  We estimate that in 2010 — the latest year for which we have data — it lifted 20 million Americans of all ages above the official poverty line (see table).

Social Security benefits are modest.  Retired workers and elderly widows collect an average of $1,200 a month, and disabled workers even less.  Nobody gets rich from Social Security:  only 7 percent of retired workers get more than $2,000 a month (and a minuscule 0.5 percent get more than $2,500).  Social Security benefits are low by international standards, too.

With the continued decline of the traditional defined-benefit pension, Social Security is the only retirement income most Americans will collect that’s indexed to inflation and guaranteed to last as long as they live.  And because it’s not means-tested, Social Security encourages people to supplement their retirement income by working part-time or by saving money.

Social Security faces a long-term shortfall that’s predictable and manageable.  (In fact, the shortfall is only slightly bigger than the cost of extending the Bush tax cuts for the richest Americans.)  Those who fear that Social Security won’t be around when today’s young workers retire misunderstand the trustees’ projections.  Even if policymakers did nothing, the program could still pay three-quarters of scheduled benefits after the trust funds run out in 2033.

Of course, policymakers should act well before then to place this popular program on sound long-term footing.  The best proposals would protect vulnerable workers and beneficiaries and give all participants ample notice of future changes to this vital program.

(For our salute to Social Security on its 75th birthday in 2010, see here.)

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More About Kathy Ruffing

Kathy Ruffing

Kathy Ruffing is a Senior Fellow at the Center on Budget and Policy Priorities, specializing in federal budget issues.

Full bio | Blog Archive | Research archive at CBPP.org

4 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. CLARENCE SWINNEY #
    1

    Back to COUNTY banking like S&L–local owners-local loans-local wealth recirculated in A county

    Americans want their pound of flesh, and rightfully so. We’ve seen our bankers commit every kind of financial crime imaginable. They trade on insider information. They manipulate markets. They rig bets. They fix prices. They sell securities that are designed to fail so that they can bet against them. They launder money for rogue nations. They create too-big-to-fail banks that gamble with impunity knowing that we will bail them out again and again. And they collectively crashed the economy causing 8 million workers to lose their jobs.

  2. RomanX #
    2

    In answer to your question is this, to make a durable program, you have to have maximum buy in. Everyone pays in, everyone gets a benefit. This keeps the program from being ghetto-ized and stigmatized. Notice the difference between how Social Security is talked about and how TANF (food stamps) are talked about.

  3. Rob #
    3

    I’d like to ask about Fact #3 on your Top 10 Fact Sheet.

    Last year I attended a conferenece in which a very well known, very, very wealthy individual popped in to speak. During his brief remarks, he mentioned that he had just started taking his Social Security benefits. I was stunned.

    According to web reports, this individual was a multi-billioniare!

    So my question is this: Why isn’t Social Security means tested? If someone is highly successful and has their own retirement income, why are we giving them Welfare too?

    • Kathy Ruffing #
      4

      We think means-testing would be a terrible idea for Social Security, as we explained here. Monthly Social Security benefits even for top earners are modest — the top “basic benefit” is less than $2,500 this year, though a few people boost that by waiting until they’re 70 to file. Most people (unlike your billionaire) don’t have much outside income. To save significant money from means-testing, you’d have to target people with just $40,000 or less of non-Social Security income, a figure most of us would regard as solidly middle-class.

      Reducing Social Security for people whose non-Social Security income is higher because they built up savings during their working years or take a part-time job in retirement would sap incentives to work and save. It’d cost a lot to administer and would undercut the strong support that this program receives because it’s universal. Pretty much everybody pays into Social Security, and virtually everybody eventually receives it. That’s been a strong principle from the start.



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