Social Security

Social Security is the cornerstone of retirement security for American workers and their families.

For more detailed factual background on the Social Security program—including its benefits, financing, and policy options—please see the Academy's recently updated learning tool, Social Security Benefits, Finances, and Policy Options: A Primer.


What is Social Security?

Social Security is the foundation of economic security for millions of Americans—retirees, disabled persons, and families of retired, disabled or deceased workers. About 169 million Americans pay Social Security taxes and 61 million collect monthly benefits. About one family in four receives income from Social Security.

Social Security is largely a pay-as-you-go program. This means that today's workers pay Social Security taxes into the program and money flows back out as monthly income to beneficiaries. As a pay-as-you-go system, Social Security differs from company pensions, which are “pre-funded.” In pre-funded retirement programs, the money is accumulated in advance so that it will be available to be paid out to today's workers when they retire. The private plans need to be funded in advance to protect employees in case the company enters bankruptcy or goes out of business.

The average monthly Social Security benefit in June 2017 was:

The maximum Social Security benefit for a worker retiring at the 2017 full retirement age is $2,687 a month.

For more information, see:

 

VIDEO: Social Security: Americans Agree

Are you interested in learning more about Social Security: Americans Agree? (Click to watch below.) This page provides more information and resources on each subtopic. Unless otherwise noted, all data on this page come from the Academy's recent study, Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis. For additional information on Social Security, see Social Security: Just the Facts.

 

“What do Americans want? A recent survey has the answer.”

To better understand Americans’ perspectives on Social Security and their views on strengthening the program for the future, the National Academy of Social Insurance conducted a nationwide online survey of 2,000 Americans ages 21 and older. The survey results were weighted to match the 2010 U.S. Census. The study also included an innovative use of trade-off analysis, a technique that enabled researchers to see how survey respondents weighed the appeal or lack of appeal of various packages of Social Security policy options.

This study, Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis, finds a sharp contrast between what Americans say they want and changes being discussed in Washington.

Further reading:


“Americans want the security and stability that Social Security provides.”

In the study, 81% of Americans agreed with the following statement: “I don’t mind paying Social Security taxes because it provides security and stability to millions of retired Americans, disabled individuals, and the children and widowed spouses of deceased workers.” In a striking show of support, more than a third (36%) of Americans strongly agreed that they don’t mind paying taxes for this reason. (See Table 2 in the full report.)

Public opinion studies over the years have consistently shown strong support for Social Security. Americans agree that Social Security is critically important, especially in today’s volatile economy.

Although benefits are modest, at just $1,330 per month on average, Americans understand their importance. 85% of Americans say that Social Security benefits are now more important than ever to ensure that retirees have a dependable income.

Further information:

73% of Americans say they don’t mind paying Social Security taxes because they know they will be receiving benefits when they retire. (See Table 2 in the full report.)

Further reading:

“That’s why most Americans want to improve Social Security.”

Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis. shows Americans agree that Social Security benefits are critically important, that benefits are not as adequate as they might wish, and that benefit increases merit consideration.

86% of Americans say that Social Security benefits do not provide enough income for retirees. 72% say we should consider increasing Social Security benefits in order to provide a more secure retirement for working Americans. (See Table 2 in the full report.)

Further reading:


“And they are willing to pay more to keep it strong. Young and old, Republicans and Democrats, high and low income, and Americans across race and ethnicity agree.”

Americans are willing to pay more to strengthen Social Security. 77% of Americans agree it is critical to preserve Social Security for future generations even if it means increasing Social Security taxes paid by working Americans. What’s more, 83% of Americans agree it is critical to preserve Social Security for future generations even if it means increasing taxes paid by wealthy Americans. 

Willingness to pay for Social Security and to consider increasing benefits is widespread and consistent across demographic lines. (See Table 9 in the full report.) Seniors in the Silent generations, Boomers in mid-career and approaching retirement, and younger workers in Generation X and Generation Y agree. Republicans, Democrats, and independents also agree. Higher- and lower-income Americans agree as well. 

Further information:


“The survey finds that most Americans prefer to gradually raise the Social Security tax in two ways: a little from all workers, and a little more from top earners; …

… and increase benefits in two ways: a little for everyone, and a little more for low-paid workers.”

This study used a new approach to measuring public opinion about Social Security. In addition to asking participants whether they would favor a particular change, they were asked to choose among various packages of policy changes, much as lawmakers might do. Participants considered various combinations of 12 possible changes, including raising taxes; lowering benefits by raising the full retirement age; changing the cost-of-living adjustment; means-testing benefits; and increasing benefits.

The most favored package of changes — preferred to the status quo by seven in 10 participants across generations and income levels — would:

Further reading:

“Social Security has never missed a payment. And Americans are willing to pay more to keep it strong for future generations.”

Social Security provides benefits to 61 million Americans every month. Since Social Security was created in 1935, it has never missed a payment. The program is projected to be fully funded over the next 17 years, but faces a long-term financing shortfall.

This study finds that Americans have a strong preference for strengthening the finances of the Social Security system and are willing to pay more to keep it strong for the future. Americans’ widespread willingness to pay more for Social Security shows that they view Social Security as a vital program that provides an essential measure of economic security for their families, themselves, and their communities.

Further information:

Who Pays for Social Security?

Workers and employers pay for Social Security. Workers pay 6.2 percent of their earnings up to a cap, which is $127,200 a year in 2017. (The cap on taxable earnings usually rises each year with average wages.) Employers pay a matching amount for a combined contribution of 12.4 percent of earnings. Self-employed persons pay both the employee and employer share for a total 12.4 percent. (Half of this contribution, the employer share, is a deductible business expense for income tax purposes.) Also, higher-income Social Security beneficiaries pay federal income taxes on their benefit income, and these taxes help pay for Social Security.

During 2011 and 2012, the premiums that workers pay for Social Security protection were temporarily reduced from 6.2 percent to 4.2 percent. The lost revenue from this “payroll tax holiday”—$103 billion in 2011 and $114 billion in 2012—was made up from the government's general fund.

In 2015 the average worker made $48,099 a year, according to the Social Security Administration. This worker and his or her employer will each pay $2,982 this year. Approximately 6 percent of all workers will earn more than the $127,200 tax cap. Earnings above the cap now account for 18 percent of the aggregate pay of all workers who pay into Social Security.

An additional tax on workers' earnings pays for Medicare hospital insurance. This is a 1.45 percent levy, paid by workers and employers each on all wages, for a total tax of 2.9 percent. Self-employed persons pay 2.9 percent.

Examples: Jon Smith makes $50,000 in 2017, and Jane Doe makes $120,000 for the year. Jon pays $3,100 for Social Security (6.2 percent of $50,000) and $725 for Medicare (1.45 percent of $50,000) for a total of $3,825 for the year. His employer pays the same amount. Jane pays $7,886 for Social Security (6.2 percent of the 2017 maximum wage base of $127,200) and $1,740 for Medicare (1.45 percent of $120,000 salary), for a total of $9,626 for 2017. Her employer pays the same.

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Who Gets Social Security?

About 61 million people collect Social Security benefits each month, and they account for about one in five people in the United States. In about one family in four, someone is receiving Social Security benefits.

About 42 million retired workers receive benefits and another 3 million individuals receive benefits as spouses or children of retired workers. A total of 6 million people receive benefits as survivors of deceased workers, including 3.7 million aged widows and widowers and 1.9 million children. Another 8.8 million people receive benefits as disabled workers, and 1.8 million people receive benefits as the child or spouse of a disabled worker. A total of 3 million children under age 18 receive Social Security and another 1.1 million adults who have been disabled since childhood get benefits as dependents of a retired, disabled or deceased parent.

Total Beneficiaries: 61,480,790

Social Security Benefits, June 2017
Beneficiaries Number of Beneficiaries Average Monthly Benefit
Retired Workers and their Families 44,951,551  
Retired workers 41,907,870 $1,369
Wives and husbands of retired workers

2,368,020

$712
Children of retired workers 675,661 $659
Survivors of Deceased Workers 6,011,856  
Widows and widowers and parents aged 60 and older 3,721,177 $1,307
Children of deceased workers

1,901,323

$840
Young widows and widowers

130,052

$9461
Disabled widows and widowers

259,304

$716
Disabled Workers and their Families

10,517,383

 
Disabled workers

8,755,405

$1,172
Wives and husbands of disabled workers

131,560

$325
Children of disabled workers

1,630,418

$357

Source link: http://www.ssa.gov/cgi-bin/currentpay.cgi


In 2016, Social Security paid $911 billion in benefits to retired workers, disabled persons, and dependents of retired, disabled or deceased workers. Of the total benefit payments, 71 percent was paid to retirees and their families, 13 percent to survivors of deceased workers, and 16 percent to disabled workers and their families.

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What is the Social Security Retirement Age?

Social Security's full-benefit retirement age is increasing gradually because of legislation passed by Congress in 1983. Traditionally, the full benefit age was 65, and early retirement benefits were first available at age 62, with a permanent reduction to 80 percent of the full benefit amount. Currently, the full benefit age is 66 years and 2 months for people born in 1955, and it will gradually rise to 67 for those born in 1960 or later. Early retirement benefits will continue to be available at age 62, but they will be reduced more. When the full-benefit age reaches 67, benefits taken at age 62 will be reduced to 70 percent of the full benefit and benefits first taken at age 65 will be reduced to 86.7 percent of the full benefit.

There is a financial bonus for delayed retirement. An individual reaching the full-benefit age in 2017 (66 years and 2 months old) receives a monthly benefit that is 8 percent higher for each year he or she delays collecting benefits. When the full benefit age reaches 67, benefits claimed at age 70 will be 24 percent higher because of that delay. The maximum retirement benefit in 2017 for someone who waits until age 70 to collect benefits is $3,538 a month.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

How Do Benefits Compare to Earnings?

Social Security retirement benefits are designed to replace part of a worker's earnings from work. The formula used to calculate these benefits takes into account lifetime earnings over 35 years. Social Security benefits replace a larger share of past earnings for low earners. While high earners receive larger benefits, their benefits replace a smaller share of what they had been making.

For example, a 65-year-old who retired in 2017 with a lifetime of “medium” earnings (about $49,366 in 2016) would receive about $18,971 a year, which would replace about 38 percent of past earnings. A “low” earner who made about $22,215 in 2016 would receive about $11,517, which would replace about 52 percent of prior earnings. A worker who always earned the “maximum” taxable amount (for a career-average taxable earnings of $120,418 in 2016) would get benefits that replace about 25 percent of prior earnings. 

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

The Role of Benefits in Income and Poverty

Social Security is the major source of income for older Americans. Over 8 in 10 Americans aged 65 and older receive Social Security. For over three out of five (61 percent) of those beneficiaries, Social Security is more than half their total income, and for one in three (33 percent), it is all or nearly all of their income. Social Security is a large share of income because many Americans age 65 and older lack significant income from other sources. Pensions (from private or government employment) were received by about half of married couples (from either the husband's or the wife's career). Among the unmarried, 41 percent of men and 38 percent of women had pensions.

Social Security is the sole source of income for about one in five (20 percent) people aged 65 and older. Certain subgroups are particularly reliant on Social Security. Of those age 65 and older, Social Security is the sole source of income for 40 percent of Hispanics, 33 percent of African Americans, 26 percent of Asian and Pacific Islanders, 18 percent of whites, and 20 percent of unmarried women.

Social Security plays an important role in keeping older Americans out of poverty. The poverty threshold was $11,511 in 2016. About 9 percent of Americans age 65 and older is poor. If they had to rely only on their income other than Social Security, about 40 percent would be poor. Overall, Social Security keeps 22 million Americans out of poverty, including nearly 15 million seniors and 1 million children.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Where Do Social Security Taxes Go?

Social Security taxes that workers and employers pay are credited to the Social Security trust funds. The trust funds are defined by law as a way to set aside money that is earmarked for Social Security. A Board of Trustees oversees the trust funds. It is made up of the Secretary of the Treasury, who is the managing trustee, the Secretaries of Labor and of Health and Human Services, the Commissioner of Social Security, and two public trustees from different political parties who are appointed by the President and confirmed by the Senate.

In 2016, the Social Security program received $958 billion in income and spent $922 billion for benefits and administrative costs, increasing the trust fund reserved by 35.2 billion. Total administrative costs amount to less than 1 percent of the funds collected each year.

What happens to the funds that are not used immediately to pay benefits? By law, the funds are invested in special-issue Treasury securities that earn interest. In effect, the funds are loaned to the Treasury, which borrows the money just as it borrows money when it sells Treasury securities to the public. In return for the funds they loan to the government, the trust funds receive Treasury securities bearing a market rate of interest. The average interest rate on the portfolio held by the Social Security trust fund was 3.2 percent in 2016.

Because the federal government is spending the cash it borrows from Social Security, “some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future,” according to the Social Security Administration website. But, the agency states on its website, “Far from being ‘worthless IOUs,' the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. savings bonds or other financial instruments of the Federal government.”

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Social Security's Future Finances

The Office of the Chief Actuary of Social Security makes projections about Social Security finances that are used by the Board of Trustees in their annual report to Congress. The report uses assumptions about population growth—including births, deaths, and net immigration—and the performance of the economy with regard to wages, prices, productivity, and unemployment. These projections are educated guesses about an unpredictable future. The Trustees offer three scenarios: high cost, low cost, and intermediate. According to the 2017 intermediate projection, assuming no changes are made in law:

Under the high-cost scenario, the trust funds would be depleted in 2029 instead of 2034. Under the low-cost scenario, the trust funds would be fully financed through the 75-year projection period. The difference among estimates shows the great uncertainty about the long-term future.

For more information on Social Security finances, see:

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Public Opinions on Social Security

Over the years, polls have consistently shown that the American public strongly supports Social Security, across party and demographic lines.

In January 2013, the Academy released Strengthening Social Security: What Do Americans Want?, a groundbreaking public opinion study focusing on Americans’ attitudes about Social Security and preferences for strengthening the program for the future. The report found that Americans overwhelmingly support Social Security and are willing to pay more to preserve and even improve benefits. In 2014, the Academy released an update this survey, Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis, the findings of which are presented below.

With 61 million people receiving Social Security benefits, Americans recognize that Social Security is a critical program. Large majorities of Americans say they don’t mind paying Social Security taxes because of the security and stability the benefits provide to millions of retired Americans, disabled individuals, and children and widowed spouses of deceased workers. These findings hold true across party lines (those agreeing include 87% of Democrats, 81% of Independents, and 72% of Republicans). Americans are also willing to pay for Social Security because they value it for themselves (73%) and their families (73%).

Table 1 - Willingness to Pay for Social Security
Please tell me if you agree, or disagree with the statements.  “I don’t mind paying Social Security taxes because ... "
Reason I don’t mind paying
Social Security taxes
Percent Agree
Percent Strongly Agree
I know that I will be receiving benefits when I retire
73%
39%
I know I would have to help support my parents, grandparents, or other family members if they did not receive Social Security
73
32
It provides security and stability to millions of retired Americans, disabled individuals, and the children and widowed spouses of deceased workers
81
36

Nearly nine in ten Americans (85%) say Social Security is more important than ever to ensure that retirees have a dependable income. These views cut across age and income lines: those agreeing include 81% of Americans in Generation X and 92% of those in the Early Boomers or prior generations, as well as 88% of people with family incomes under $30,000, 89% of those earning between $50,000 and $75,000, and 78% of those earning over $100,000.

Moreover, Americans are willing to pay more to keep Social Security strong. About 8 in 10 (77%) say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by working Americans. An even higher percentage (83%) say it is critical to preserve Social Security even if it means increasing the Social Security taxes paid by wealthy Americans. These findings hold true across party lines, age groups, race and ethnicity, and income levels.

What sets this study apart from others is its use of trade-off analysis, a technique widely used in market research to learn which product features customers want. Survey participants chose which package of Social Security policy changes they prefer and are willing to pay for, considering various combinations of 12 changes, including raising taxes, lowering benefits, and increasing benefits.

Seven in ten Americans prefer a package of policy changes that increases Social Security revenues in two ways and improves benefits in two ways. Support for this package cuts across political parties, age groups, income levels, and race and ethnicity.

Jasmine V. Tucker, Income Security Senior Policy Analyst at the Academy and a co-author of the report, concluded:

“At a time when Americans seem deeply divided about the right size and role of government, it is striking that Americans across political and generational lines agree on specific policies to pay for and improve Social Security benefits.”

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

How Will Boomers Affect Social Security?

Social Security faces a financial challenge from the impending retirement of the largest generation in American history, the 76 million persons born in the “baby boom” years, from 1946 through 1964. Boomers began to reach age 62 in 2008. The cost of Social Security will rise faster than tax income because the population over age 65 will grow faster than the working-age population. Both the baby boom generation and increasing life expectancy after age 65 contribute to an aging population. When Social Security began in 1935, life expectancy at age 65 was an additional 12.5 years. In 2016, it was an additional 20.7 years for women and 18.2 years for men. By 2030, it is projected to be 21.6 for women and 19.2 years for men. But these gains in life expectancy are not shared evenly throughout the population, with less-advantaged groups generally seeing smaller increases in life expectancy. While the number of beneficiaries will grow, tax rates remain unchanged in current law.

By 2031, when the youngest boomers will have reached 67, Americans age 65 and older are projected to number 75 million, nearly doubled from 39 million in 2008. The beneficiary-to-worker ratio, which compares the number of people drawing benefits to the number of workers paying into Social Security, will rise from 35 per 100 in 2014 to 44 per 100 in 2030. 

Even as the boomers retire, Social Security costs are projected to rise only slightly, because the retirement age increase and other cuts enacted in the 1980s have already reduced benefits. The next section explores how Social Security spending compares to the size of the economy over time.

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Social Security as a Share of the Economy

Because more people will receive benefits, Social Security will grow faster than the total economy, or gross domestic product (GDP). How much faster will it grow as a share of the economy?

Social Security benefits amounted to 5 percent of GDP in 2016. By 2035, Social Security benefits in current law are projected to be 6.1 percent of GDP. That is an increase of 1.1 percentage points over the current cost of the program.

How does that 1.1 percentage point increase compare with past changes in national spending when the baby boomers were children? Public spending for education grew about twice as much as the projected increase in Social Security. Public education spending – by local, state and federal governments – grew from 2.5 percent of GDP in 1950, just before boomers began to enter kindergarten, to 5.3 percent of GDP by 1975. This was an increase of 2.8 percentage points.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Options to Balance Social Security Finances

While Social Security's income is projected to exceed outgo through 2021, the 2017 Trustees Report estimates that, after the Trust Fund assets have been depleted in 2034, the program will be able to pay only 77 percent of benefits thereafter. To fully finance benefits over 75 years, policymakers will need to choose between increasing revenues or reducing spending, or a combination of both steps.

Social Security has a long-run actuarial deficit of 2.83 percent of taxable payroll, according to the 2017 Trustees Report. This means that the deficit could be closed immediately if tax rates were raised from the 6.2 percent paid by both workers and employer (a total of 12.4 percent) to 7.7 percent each (or 15.4 percent in total). In other words, the deficit would be eliminated if workers and employers each paid 1.5 percent of wages more in Social Security taxes.

Options for increasing the system's revenues include:

Options for lowering benefits include:

In addition, a number of other policy options would make benefits more adequate for specific vulnerable populations. Those options include:

For a discussion of various solvency and adequacy options, see:

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Proposals for Private Accounts

Various proposals call for prefunding Social Security by shifting a portion of Social Security taxes into individually held accounts. The debate about private accounts in Social Security is separate from the issue of how to close Social Security's financing gap. Individual accounts, by themselves, make no independent contribution to the long-term solvency of Social Security. In fact, shifting Social Security taxes out of the traditional system to fund personal accounts hastens the day when funds will be insufficient to pay scheduled benefits. All scheduled Social Security taxes are needed to pay benefits for current and future beneficiaries.

Plans to shift Social Security taxes to individual accounts change the form of Social Security. Creating individual accounts would change Social Security from a social insurance system, which pools risks broadly and defines benefits in law, to a system of personal accounts in which people get out what they put in, plus investment gains, and minus investment losses and administrative expenses. Individual accounts are based on a property, or ownership concept, while the traditional system is based on insurance concepts and risk pooling.

Supporters of traditional Social Security point to its long record of success in providing basic income security for older Americans, disabled workers and their families, and families of deceased workers. They say that the current form of Social Security works well and is essential to ensure a secure foundation for workers and their families. Private accounts introduce risks that should not be a part of the basic foundation of income security. Rather, they argue that private retirement savings are an important supplement to Social Security, but are poor substitute for any part of it. Proponents of traditional Social Security believe that its finances can be balanced through incremental changes.

How Would Money Be Paid Out of Individual Accounts?

Discussions of private accounts in Social Security have focused on how money would build up in the accounts. Yet questions about how money would be paid out of the accounts have been largely neglected. A 2005 Academy report, Uncharted Waters: Paying Benefits from Individual Accounts in Federal Retirement Policy, represents two and a half years of work by a non-partisan panel of 27 experts on retirement accounts and Social Security. It addresses such questions as:

The questions are explored in depth in the Panel's final report.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Children's Stake in Social Security

Social Security is the primary form of life insurance for many families with children. For an illustrative young family — a 30-year-old worker earning $30,000-$35,000 a year with a spouse and two young children — Social Security disability and life insurance protection are each valued at over $550,000. 

Currently, more children live in families receiving income from Social Security than live in families that receive Temporary Assistance for Needy Families (TANF). About 8.4 million children benefit from Social Security. They include 3.1 million children who receive benefits directly because a parent has died, become disabled, or retired, and an additional 5.3 million children who live with a relative receiving Social Security benefits. Children can collect benefits up to the age of 18, or until 19 if they are still in high school. The spouse of a worker who died can collect benefits to care for the worker's child who is under age 16, or who is disabled.

Life insurance benefits for families with children are based on the deceased worker's past earnings and the number of eligible children in the family. Larger families receive higher benefits, and a family maximum limits total payments to families of three or more beneficiaries. For families of the same size, survivors of low-income workers receive benefits that replace a larger portion of lost earnings than is the case for families of higher-earning workers. If a worker, whose earnings would have averaged $40,000 over a full career, had she lived, died at age 35 in 2015, annual Social Security survivors' benefits for the family of a surviving spouse and two children would be about $29,844. This level of benefits would replace about 77 percent of the deceased worker's earnings of $38,902 in 2014.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Social Security and People of Color

Social Security is especially important to people of color because they are less likely than white Americans to have pensions or retirement savings. In 2014, 44 percent of those age 65 and older received income from retirement benefits other than Social Security, such as defined benefit pensions, Individual Retirement Accounts (IRAs), 401(k) plans and related savings. People of color were less likely to receive income from these sources to supplement Social Security. For instance, among seniors over age 65 in 2014, 30 percent of African Americans, 25 percent of Asian Americans, and 19 percent of Americans of Hispanic descent, received such income, compared to 47 percent of white Americans.

As a result, people of color rely more heavily on Social Security income in retirement. Among seniors 65 and older, Social Security is the sole source of income for 40 percent of Hispanics, 33 percent of African Americans, and 26 percent of Asian and Pacific Islanders, compared to 18 percent of whites. 

Because people of color generally earn less than whites, they benefit from Social Security's progressive benefit formula, which replaces a higher percentage of pre-retirement earnings for low-wage workers. In 2014, median earnings for people who worked full-time, year-round were $44,000 for all workers, compared to $31,760 for African Americans and $30,000 for Hispanics. During that year, the average annual Social Security income for African American seniors was $14,672 for men and $12,640 for women.

Social Security's survivor and disability benefits are important sources of income security for many people of color. Because African Americans have lower life expectancy and higher disability rates before age 65 as compared to other races, they are more likely to receive Social Security disability and survivor benefits. 

Support for Social Security is particularly strong among African Americans and Hispanics. In a recent Academy survey, 91 percent of African Americans and 84 percent of Hispanics and of whites say they don’t mind paying Social Security taxes because it provides security and stability to millions of Americans. Eighty-seven percent of Americans agree it is critical to preserve Social Security for future generations even if it means increasing Social Security taxes paid by working Americans; those agreeing include 90 percent of African Americans, 84 percent of Hispanics, and 81 percent of whites. In addition, 68 percent of African Americans and 72 percent of Hispanics prefer a package of Social Security changes that includes two revenue increases and two benefit increases.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Women's Stake in Social Security

Women are the majority of adult beneficiaries, collecting Social Security as retired or disabled workers, and as wives and widows. They make up 56 percent of Social Security beneficiaries age 62 and older, and 66 percent of beneficiaries age 85 and older.

Women spend fewer years in the workforce because they are more likely to be at home when their children are young, and they typically earn less than men when they are in the work force. This means that they are less likely to qualify for a private pension, and if they do, it usually will be smaller than the pension earned by men. In 2014, 32 percent of unmarried women over 65 were receiving their own private pensions outside of Social Security, compared to 34 percent of unmarried men over 65. For these reasons, Social Security serves as an important protection for women against economic insecurity in old age.

Many women depend heavily on Social Security as a source of income in retirement. For people over age 65, Social Security accounts for 47 percent of total income for unmarried women, including widows, compared to 34 percent of total income for unmarried men. Forty-six percent of unmarried women over 65 receiving benefits rely on Social Security for nearly all (90 percent or more) of their income.

The average married woman receiving Social Security benefits will outlive her husband. A 65-year-old woman in 2015 is expected to live an additional 21.5 years, on average, compared to 19.1 years for men. Therefore, the spousal and survivor benefits are key parts of the program for women. In 2016, approximately 27 million women were over the age of 65, compared with about 22 million men, or a ratio of 126 women for every hundred men, according to data from the Census Bureau.

Because women are often lower-paid than men, they benefit from Social Security's progressive benefit formula, which replaces a larger proportion of past wages for lower-earning workers.

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* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Social Security, Marriage, and Divorce

A married person can collect retirement benefits based on his or her own earnings from work, or an amount equal to 50 percent of the other spouse's retired-worker benefit—whichever is the higher amount. The following examples illustrate how these benefits are calculated.

Example: Mrs. Williams will get a retirement benefit of $1,200 a month based on her work record. Mr. Williams is entitled to a retirement benefit of $500 a month based on his own work history. He will receive his own $500, plus an additional $100 to bring his total to $600 a month, based on 50 percent of Mrs. Williams' benefit. Total family benefits for the Williams household will be $1,800 a month.

Example: Mrs. Rodriguez is entitled to a retirement benefit of $1,100 a month based on her work history. Her husband will get a benefit of $1,400, which would provide a spousal benefit of $700. Mrs. Rodriguez receives her own benefit of $1,100 a month, because that is the larger of the two amounts. Total family retirement benefits: $2,500 a month.

How does divorce affect Social Security benefits? A person who had been married for at least ten consecutive years–and is now single– can get the 50 percent spousal benefit even if the couple has divorced. A surviving divorced spouse can get the 100 percent survivor benefit if unmarried or remarried after the age of 60. A disabled former spouse is eligible for this benefit at age 50.

Example: Fred and Mary Simmons were married for twelve years and are now divorced. Fred is retiring at age 65 and drawing $1,300 in Social Security benefits. Mary, who is single and age 65, can draw a benefit of $650 a month. Upon Fred's death, she can receive $1,300 a month.

For more information, see:

Read what some Academy members think:*

* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Social Security for Widowed Spouses in Retirement

Social Security is a key source of financial security to widowed spouses in old age. About 7.5 million individuals age 60 and older receive benefits based, at least in part, on a deceased spouse's work record. These beneficiaries include 3.7 million individuals who are entitled only as widowed spouses, and another 3.8 million who are entitled to benefits based on their own work records, but get higher benefits as widows or widowers. These surviving spouse beneficiaries are overwhelmingly women.

The benefits are important to women because wives tend to earn less than their husbands and they typically outlive their husbands – both because women live longer than men, on average, and because wives tend to be a few years younger than their husbands. When a retired worker dies, the surviving spouse gets an amount equal to the worker's full retirement benefit.

Example: John Smith has a $1,200-a-month retirement benefit. His wife Jane gets $600 as a 50 percent spousal benefit. Total family income from Social Security is $1,800 a month. When John dies, Jane will get $1,200 a month as her survivor benefit, two-thirds of the benefit the Smiths had received as a couple. Total income for Jane as a widow is $1,200 a month.

Example: Bill and Emily Jones each get benefits based on their individual earnings. Each of them is entitled to $1,200 a month, and total family income is $2,400 a month. When one of them dies, the widowed spouse continues to receive $1,200 a month. The widowed spouse cannot get both benefits. Therefore total monthly family income is reduced to $1,200 at widowhood, or 50 percent of their former income as a couple.

Example: Joe Sanchez receives $1,200 a month and his wife Consuela earned enough on her own to get an $800 monthly check. Total family income is $2,000 a month. When Joe dies, Consuela will receive her retirement check plus $400 a month as a widow. Her total benefit will be as much as Joe had been receiving, $1,200 a month, or 60 percent of their former income as a couple.

For more information on Social Security and survivor benefits, see:

What is Social Security Disability Insurance?

Social Security Disability Insurance (DI) pays monthly benefits to workers who are no longer able to work due to a significant illness or impairment that is expected to last at least a year or to result in death within a year. It is part of the Social Security program that also pays retirement benefits to the vast majority of older Americans. Benefits are based on the disabled worker's past earnings and are paid to the disabled worker and to his or her dependent family members. To be eligible, a disabled worker must have worked in jobs covered by Social Security. In July 2017, 8.8 million disabled workers received benefits.

How Much Is the Disability Benefit?

The disability benefit is linked through a formula to a worker's earnings before he or she became disabled. The following figures show how the disability insurance benefits compare to prior earnings for a worker who became eligible for benefits in 2014 at age 55.

Earnings Before Disability (Lifetime Average*) Annual DI Benefit Percent of Earnings Replaced by Benefit
$20,000 $12,288 61%
$40,000 $18,612 47%
$60,000 $24,948 42%

Taxable maximum
($127,200 in 2017)

$33,672 26%

*Average indexed earnings

The average benefit paid to disabled workers in June 2017 was $1,172 a month or about $14,064 a year.

Who Pays for Disability Insurance Benefits?

Workers and employers pay for the DI program with part of their Social Security taxes. Workers and employers each pay a Social Security tax that is 6.2 percent of workers' earnings up to a cap of $127,200 in 2017. The cap is adjusted each year to keep pace with average wages. Of the 6.2 percent, 5.015 percent goes to pay for Social Security retirement and survivor benefits and 1.185 percent pays for disability insurance. The combined tax paid by workers and employers for disability insurance is 2.37 percent of wages, while the combined tax for retirement and survivor benefits is 10.03 percent, for a total of 12.4 percent.

How much does the DI program cost?

In 2016, the disability insurance trust fund received $160 billion, mainly from the 1.185 percent tax on wages that workers and employers both pay. Total payments from the DI trust fund were $146 billion, mainly for benefits to disabled workers and their families, meaning that income exceeded outgo by $14 billion in 2016. The cumulative assets in the disability insurance trust fund totaled $46 billion at the end of 2016. Administrative expenses were 1.9 percent of outgo from the DI fund, and the remaining portion paid for benefits.

Who is eligible for DI benefits?

The Social Security test of disability is very strict. To be eligible for disability benefits, the Social Security law says that the applicant must be “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or is expected to last for a continuous period of at least 12 months.” Furthermore, the impairment or combination of impairments must be of such severity that the applicant is not only unable to do his or her previous work but cannot, considering his or her age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy (Social Security Act, section 223(d)).

A person is considered to be involved in substantial gainful activity if he or she earns more than a certain amount. If a non-blind individual earns more than $1,170 a month in 2017, he or she would not be eligible for disabled worker benefits. The amount is adjusted each year to keep up with average wages. (In some cases earnings can be reduced by the costs associated with work, such as paying for a wheelchair or services of an attendant. If deductible work expenses bring net earnings below $1,170 a month, the individual can be eligible for benefits.) The substantial gainful activity level for blind individuals in 2017 is $1,950 a month.

State agencies, operating under federal guidelines, make the medical and vocational determinations for the Social Security Administration about whether applicants meet the test of disability in the law. Medical records, work history, and the applicant's age and education are considered in making the determination.

There is a five-month waiting period after the onset of disability before payments begin. If someone suffered a disabling injury in January and met Social Security's disability definition, he or she would become eligible for the first disability payment for July.

What are the most common disabilities for DI recipients?

Many beneficiaries have multiple conditions. Of the nearly 9 million individuals receiving disabled worker benefits at the end of 2014, 31 percent had mental impairments as the main disabling condition, or primary diagnosis. Musculoskeletal conditions – such as arthritis, back injuries and other disorders of the skeleton and connective tissues – were the main condition for 32 percent of the disabled workers. These conditions were more common among beneficiaries over the age of 50. About 8 percent had conditions of the circulatory system as their primary diagnosis. Another 9 percent had impairments of the nervous system and sense organs. The remaining 20 percent includes those with injuries, cancers, infectious diseases, metabolic and endocrine diseases, such as diabetes, diseases of the respiratory system, and diseases of other body systems. Moreover, many beneficiaries have life-threatening conditions: about 1 in 5 men and nearly 1 in 6 women who enter the program die within five years.

Attributes of Disabled-Worker Beneficiaries

Disabled-worker beneficiaries are at risk of being poor or near poor. About 30 percent of disabled workers, compared to 15 percent of all working-age adults, have incomes below 125 percent of the poverty threshold. Moreover, 82 percent of DI beneficiaries rely on Social Security for more than half their income, and 37 percent of disabled worker beneficiaries rely on these benefits for all of their income.

SSDI recipients are also more likely to be older, with the average age of beneficiaries at 54 in 2015. Three out of four (74 percent) are over 50 years old and a third (34 percent) are over 60 years old.

When comparing with other adults, disabled workers are more likely to be black, and to have a lower level of educational attainment; almost half have a high school diploma or less.

What Is Supplemental Security Income?

Supplemental Security Income (SSI) is a federal program that pays monthly benefits to low-income aged, blind and disabled individuals. The Social Security Administration runs the program, which is financed from general tax revenues, not from Social Security taxes. The SSI test of disability for adult applicants is the same as the test in the Social Security disability insurance program. Only people who have low incomes and limited financial assets are eligible for SSI. The federal SSI payment in 2017 for an individual with no other countable income is $735 a month. Payments are reduced as other income rises, and some states supplement the federal payment. Each month on average in 2016, 8.3 million low-income adults received SSI. These beneficiaries included 4.8 million adults under age 65 who were eligible based on disability or blindness and 2.2 million adults aged 65 and older. In addition, 1.3 million children under age 18 receive SSI based on disability or blindness.

Health Care Coverage for Disability Beneficiaries

Individuals who are receiving Social Security disability insurance (DI) become eligible for Medicare after receiving DI for two years. Low-income individuals who receive SSI are generally eligible for Medicaid immediately. Health coverage is critically important for those receiving disability benefits, because individual insurance policies are likely to be unaffordable or unavailable to them. According to the Academy report, Balancing Security and Opportunity: The Challenge of Income Disability Policy, "Many people with chronic health conditions or disabilities are at risk of very high health care costs. They often cannot gain coverage in the private insurance market, and even when they do have private coverage, it often does not cover the range of services and long-term supports that they need. Current gaps in health care coverage for people with disabilities limit their labor market options in several ways.”

Is DI out of sync with the Americans with Disabilities Act?

The Social Security Advisory Board, which was created by Congress to advise the President, the Congress, and the Commissioner of Social Security, posed the question of whether the DI program and its test of disability is out of “sync” with the Americans with Disabilities Act (ADA). In April 2004, the Academy drew on findings of its Disability Policy Panel report, Balancing Security and Opportunity, to testify before the Board as follows:

“The need for a disability wage-replacement program does not go away because we have the Americans with Disabilities Act (ADA). Nor is the need for such a program eliminated by advances in medicine, changes in the demands of jobs, new assistive technology, or other environmental accommodations. These developments may increase employment opportunities for some categories of individuals with disabilities. For example, the ADA expands opportunity for people who have highly valued skills whose main impediments to work had been based on discrimination, architectural barriers, or other impediments that the ADA alleviates. But other individuals may face increasing impediments to work as the work environment and demands of work change. For example, in an increasingly competitive world of work, emphasis on versatility and speed may impede employment prospects for people with mental impairments. Because the phenomenon of work disability will remain with us in a competitive economy, wage replacement programs remain essential.”

Is the Social Security Definition of Disability Out of Date?

The Social Security Advisory Board has asked whether the Social Security definition of disability should be changed in some fundamental way. The Academy's Disability Policy Panel studied this question at length and reached the following conclusions:

Programs for people with disabilities should use definitions of disability as eligibility criteria that match the purpose of the program. A single, one-size-fits-all definition would not suit the varied needs of the highly diverse population of people with disabilities, nor would it match the particular purposes of different programs.

If the purpose of the program is to establish civil rights protections, a broad definition of disability, such as in the ADA is used: “Disability means … a physical or mental impairment that substantially limits one or more major life activities, a record of such an impairment, or being regarded as having such an impairment.”

If the purpose is to define eligibility for vocational rehabilitation, then the legal definition of eligibility is based on need for and likelihood of benefiting from such services.

Programs that provide personal assistance or long-term care services generally define eligibility in terms of the need for those particular services, such as need for assistance with activities of daily living.

Earnings-replacement insurance programs that are designed to replace income from employment all use a definition of disability based on loss of ability to work. This is true in private disability insurance, as well as in public programs. The wage-replacement benefits of disability insurance are not designed to pay for the added expenses associated with disability – such as personal assistance or vocational rehabilitation. Although these services might be needed, wage replacement benefits are designed to help pay everyday living expenses – such as food, housing, and utilities – when wages are lost.

The Social Security test of work disability is very strict. A less strict test of inability to work would benefit people with partial disabilities and it would cost more.

U.S. and European Spending on Disability Benefits

By international standards, U.S. spending on disability benefits is relatively modest, according to data from the Organization for Economic Cooperation and Development. Spending on public disability benefits as a share of the total economy, or gross domestic product, in 2013 was 1.4 percent in the United States. This is compared to 1.3 percent in Germany, 1.5 percent in the United Kingdom, 2.1 percent in Sweden, and 2.8 percent in the Netherlands. These figures include public social insurance systems (such as Social Security disability insurance in the United States) and means-tested disability benefits (such as Supplemental Security Income in the United States).

For more information on Social Security Disability Insurance and SSI, see:

Read what some Academy members think:*

* The views of Academy members are their own and not an official position of the National Academy of Social Insurance or its funders.

Key Dates in the History of Social Security

President Franklin D. Roosevelt signed the Social Security Act on August 14, 1935. Social Security taxes were first collected in January 1937, with workers and employers each paying one percent of the first $3,000 in wages and salary.

In 1939 President Roosevelt signed legislation establishing benefits for survivors and dependents.

Early retirement benefits, allowing people to draw checks at age 62, were enacted in 1956 for women and in 1961 for men.

Disability payments were enacted in 1956 and initially were payable only to workers aged 50-64.

Payments to divorced wives began in 1965, and to divorced husbands in 1977.

President Nixon signed legislation in 1972 authorizing a 20 percent cost-of-living adjustment (COLA) and making the COLA automatic each year.

President Reagan signed legislation in 1983 providing for taxation of benefits, and for a gradual increase in the age of full retirement benefits to 67.

President Clinton signed legislation in 2000 eliminating the retirement earnings test for people above the full-benefit retirement age. The earnings test required beneficiaries to give up part of their Social Security benefits when they earned in excess of a certain amount. It still applies to beneficiaries below the full-benefit age.

In 2011 and 2012, a "payroll tax holiday" temporarily reduced the Social Security tax rate for workers from 6.2 to 4.2 percent. The lost revenue to the Social Security program was reimbursed from the federal government’s general revenues.

In 2015, Congress passed the Bipartisan Budget Act, which reallocated the portions of the 6.2 percent payroll tax paid by workers and their employers going to DI and OASI. Prior to January 1, 2016, 0.9 percent was allocated to the DI Trust Fund, and the remaining 5.3 percent was allocated to OASI. As a result of this law, 1.185 percent was allocated to the DI trust fund and 5.015 percent was allocated to the OASI Trust Fund for the period January 1, 2016 through December 31, 2018. After 2018, the allocation of Social Security payroll contributions will revert to what it had been for the years 2000 through 2015.

For more information on the history of Social Security, see:

VIDEO: Social Security: Just the Facts

Are you interested in learning more about Social Security: Just the Facts? (If you have not seen the video, click to watch below.) This page provides more information and lists additional resources for exploring each topic.

“Social Security is insurance.”

Social insurance encompasses broad-based systems that help workers and their families pool risks to avoid loss of income due to retirement, death, disability, or unemployment, and to ensure access to health care. In the case of Social Security, it covers workers for the risks that go hand-in-hand with getting older but are out of one’s control, affect all of us, and are difficult to plan for.

Further reading:

From the Social Insurance Sourcebook:

 

“The retirement costs of the baby boomers are mostly paid for.”

Yearly surpluses have been accumulating in the trust fund since 1984. Social Security has collected more in revenue than it has paid out in benefits, creating substantial reserves for the retirement of the baby boomers.

Further reading:

From the Social Insurance Sourcebook:

 

“The good news is that we can afford to keep Social Security strong.”

There are many options for making moderate adjustments to Social Security that will keep Social Security solvent for 75 years or more.

Further reading:

From the Social Insurance Sourcebook:

 

“A large majority of Americans—even across party lines and age groups—don’t mind paying for Social Security because it provides security & stability to the people who get it.”

Many public opinion polls have found that Americans draw a connection between the Social Security taxes they pay and the value they get for themselves, for their families, and for their broader communities. Moreover, working Americans also express willingness to pay more if that is what it will take to preserve Social Security for future generations. Large majorities—across party lines (88% of Democrats; 83% of independents; and 74% of Republicans) and generations (77% of Generation Y; 80% of Generation X; 84% of Baby Boomers; and 90% of the Silent Generation)—agree that “it is critical that we preserve Social Security for future generations even if it means increasing Social Security taxes paid by working Americans.”

Further reading:

From the Social Insurance Sourcebook:

 

“The average retirement benefit is modest, $1,230 a month. Yet benefits are the main income for most seniors.”

Social Security’s benefits are modest, both in absolute terms and in terms of the percentage of wages replaced. In light of the trillions of dollars of losses in savings and home equity experienced in the last few years, the adequacy of Social Security benefits is a subject of growing concern.

Further reading:

Additional resources from the Academy Improving the Lives of Vulnerable Americans through Social Security education project:

From the Social Insurance Sourcebook:

 

“Social Security is efficient.  Less than a penny of every dollar is spent on administration. “

Social Security spends less than one cent on every dollar on administration, even though it is collecting taxes from over 90% of the workforce and sending benefits to 61 million Americans.

Further reading:

 

“Social Security lasted through all of these unexpected events – because it was designed to weather storms.”

Social Security was passed in 1935, in the midst of the Great Depression, and has remained a stable source of income for its beneficiaries in both good and bad economic times ever since.

Further reading:

Additional resources from the Academy Improving the Lives of Vulnerable Americans through Social Security education project:

From the Social Insurance Sourcebook:


To view the video in Spanish, watch here: http://bit.ly/elsegurosocial. Para ver el vídeo en español (“El Seguro Social: Simplemente la Verdad”), haga clic aquí: http://bit.ly/elsegurosocial.

About the Social Security Section of this Sourcebook

The Social Security section of "Learn" draws on reports, briefs, fact sheets, testimony, seminars, and other items available on the website of the National Academy of Social Insurance. Its purpose is to highlight key facts and to serve as a roadmap to more complete information about Social Security on the Academy's website.

This section was updated in September 2017 by Elliot Schreur, Research Associate, of the Academy staff. Bob Rosenblatt, Academy Senior Fellow, compiled the original social insurance sourcebook, which was released in December 2003.

About the National Academy of Social Insurance

The National Academy of Social Insurance is a nonprofit, nonpartisan organization made up of the nation's leading experts on social insurance. Its mission is to advance solutions to challenges facing the nation by increasing public understanding of how social insurance contributes to economic security. Social insurance encompasses broad-based systems for insuring workers and their families against economic insecurity caused by loss of income from work and the cost of health care. The Academy's scope covers social insurance such as Social Security; Medicare; workers' compensation; and unemployment insurance, related public assistance, and private employee benefits.