Social Security, the largest government program in the world, is projected to pay out $950 billion in benefits for older Americans and another $150 billion on Social Security disability payments this year, according to The Washington Post.
Research shows the entitlement program’s benefits will start to exceed its tax collections in 2020, and the program will deplete its $2.9 trillion reserve fund in 2035 if no action is taken.
As politicians suggest “fixing,” cutting, or even expanding Social Security benefits through a variety of methods (primarily focused on increasing taxes on the wealthy), it is clear the public should expect either smaller benefits, higher taxes or both in the future as the government looks to extend the runway for a program born in 1935 that roughly four in 10 Americans rely on as their sole source of retirement income.
While 401k-focused advisors are constantly striving to lower that percentage by getting more Americans to save in their employer-sponsored retirement plans, the beginning of a new year still seems like a good time for a refresher on some interesting Social Security facts and figures. There could probably be 100, but what follows are 20 bullet points filled some of the most pertinent statistics and projections, divided into some common-theme categories.
Average Benefit Amounts
- The average Social Security benefit was $1,503 per month in January 2020. The maximum possible Social Security benefit for someone who retires at full retirement age is $3,011 in 2020. However, a worker would need to earn the maximum taxable amount, currently $137,700 for 2020, over a 35-year career to get this Social Security payment.
Source: U.S. News & World Report
- For a worker who becomes eligible for Social Security payments in 2020, the benefit amount is calculated by multiplying the first $960 of average indexed monthly earnings by 90%, the remaining earnings up to $5,785 by 32%, and earnings over $5,785 by 15%. The sum of these three amounts, rounded down to the nearest 10 cents, is the initial payment amount. Cost-of-living adjustments and delayed retirement credits can boost your payments above this amount.
Source: U.S. News & World Report
- The average benefit per individual is about $18,024 in 2020. For married couples, it’s $2,531 a month or $30,372.
Source: MLive
- Among retired workers who collected Social Security benefits based on their own work records, men ($1,627) receive a higher average monthly benefit than women ($1,297).
Source: Social Security Administration
- There are now only 2.8 workers per Social Security beneficiary compared to 3.3 as recently as 2007. The Social Security Administration estimates Social Security benefits will start to exceed the program’s costs in 2020, and the program will deplete its $2.9 trillion reserve fund in 2035.
Source: MLive
Retirees Counting on It
- 40.2% of Americans ages 60 and up rely solely on Social Security for retirement income.
Source: National Institute on Retirement Security
- Unmarried men (39.2%) and women (42.3%) are more likely to rely on Social Security for their sole source of retirement income. That’s in comparison to 23.8% for couples.
Source: National Institute on Retirement Security
- Social Security is an important income source for 7 in 10 recent retirees. According to Secure Retirement Institute research, it makes up 37% of their total income on average.
Source: Secure Retirement Institute
- More than one in four workers (28%) expect to rely on Social Security as their primary source of income in retirement, including Boomers (42%), those with household income of less than $50,000 (40%), noncollege graduates (35%), and women (32%).
Source: Transamerica Center for Retirement Studies
- Only 55% of Millennials are confident that Social Security will provide them with meaningful income in retirement.
Source: Insured Retirement Institute
- 21% of married couples and 45% of single people receiving Social Security retirement benefits rely on the program for at least 90% of their income.
Source: MLive
- The income “replacement rate” from Social Security will slip to about 35% for a medium earner retiring at 65 in the future, chiefly because the full retirement age, which has already risen to 66, will climb to 67 over the 2017-2022 period.
Source: Center on Budget and Policy Priorities
Cost of Living Adjustment
- The 2020 Social Security cost-of-living adjustment (COLA) is 1.6%, which begin with benefits paid to more than 63 million Social Security beneficiaries this month. For an average retiree who gets a monthly check of $1,460, that adds up to an additional $23.40 a month, according to The Senior Citizens League. In 2019 recipients received a 2.8% COLA, or an average $40.90 more each month than in 2018, the most since 2012. But because inflation has moderated over the past year, the COLA increase isn’t as large for 2020.
Source: The Senior Citizens League
- Social Security benefits have lost 33% of buying power since 2000. TSCL’s analysis found that, over a 10-year period, average Social Security benefits of $1,075 per month in 2009 lost a total of $15,258 in financial growth from 2010 to 2019 when compared to the previous decade when COLAs averaged 3%. By the end of that 10-year period, average benefits were $223 per month lower than they would have been had inflation averaged the more typical 3%. People who have been receiving Social Security benefits since 2009 have only seen a COLA higher than 2.8% one time (in 2012).
Source: The Senior Citizens League
By the Numbers
- 67.9 million people received Social Security benefits in 2018. Of those, 5.6 million were newly awarded Social Security benefits in 2018. Women represent 55% of adult Social Security beneficiaries in 2018, and 7 in 10 beneficiaries in their 90s. In addition, women make up 96% of Social Security survivor beneficiaries.
Source: Social Security Administration
- $137,700: the maximum amount of earnings subject to the Social Security tax (taxable maximum) in 2020, an increase of $4,800 from 2019’s $132,900 maximum. Bernie Sanders has noted in his presidential campaign that “a billionaire today pays the same amount of money into Social Security as someone who makes [2019’s cap of] $132,900 a year because the Social Security payroll tax is capped.” Click here for a look some of the Democrat proposals to reform Social Security.
Source: Social Security Administration
Filing for Benefits
- Social Security is technically designed to pay the same amount in total lifetime benefits regardless of the age at which a beneficiary claims them. Filing for benefits early will reduce the amount of monthly payments, but you’ll collect more payments. Delaying benefits provides higher monthly payments but fewer of them. If you live an average life expectancy, these factors will even themselves out.
Source: Motley Fool
- Benefits increase by about 8% a year for every year of delaying collecting Social Security, up until age 70. Someone who qualifies for $12,000 a year in Social Security at age 62 would get $15,600 by waiting until his or her full retirement age and $19,675 by waiting until age 70.
Source: MLive
- Although benefits can begin as early as age 62 for eligible seniors, the program incentivizes patience. “If we were to place two retired workers with identical scenarios next to each other (i.e., same work history, earnings history, and birth year), the one claiming their benefit at age 70 could earn as much as 76% more per month than a retired worker taking their payout as soon as possible (age 62),” Motley Fool notes. Around 60% of retired workers take their payout prior to reaching age 65 while only around 10% begin taking their Social Security retirement benefit between ages 67 and 70.
Source: Motley Fool
Scam Alert
- Gail Ennis, inspector general at the Social Security Administration, has issued a new warning for the general public to be extremely vigilant of telephone scammers that are now using email to threaten innocent victims and convince them to fork over sensitive information like Social Security numbers. Social Security scams are so popular during tax season because fraudsters can use stolen Social Security numbers to claim tax refunds before the owners of those numbers have a chance to file their legitimate tax returns. Social Security has a news tool that can be used to report suspicious activity. Find it here.
Source: Social Security Administration