Did you know that some 5.6 million people were newly awarded Social Security benefits in 2018?
Fifty-five percent of them were retired workers, 12% were disabled workers and 33% were survivors or the spouses and children of retired or disabled workers.
And those are just some of the tidbits of information in the newly released booklet from the Social Security Administration, Fast Facts & Figures About Social Security, 2019.
What else is noteworthy?
COLA is key
There are few sources of inflation-adjusted, guaranteed-for-life income, but Social Security is one such source. In 2019, the cost-of-living adjustment (COLA) for Social Security benefits was 2.8%.
“It sounds insignificant, but it’s huge,” says Andy Landis, author of “Social Security: The Inside Story.”
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“Your Social Security payments are inflation-proof, with an annual raise equal to the consumer price index or CPI,” he says. “Compound that over a 20-30-year retirement, and your seemingly-modest Social Security can become your biggest income source.”
What’s the average benefit?
COLAs are important. But Social Security was never meant to be a person’s primary source of income in retirement, say experts.
Joseph Stenken, an advanced products consultant for Ameritas, a Lincoln, Nebraska-based financial services company, says the current maximum monthly benefit of $2,861, or $34,332 a year, should be a reminder for pre-retirees of how much (or how little) Social Security is available for them in retirement.
An even bigger reminder? Most beneficiaries receive far less than the maximum monthly benefit. Consider this: The estimated average monthly Social Security benefit payable in January 2019 was $1,461 for all retired workers, $2,448 for a couple both receiving benefits and $1,386 for a widow or widower. And this suggests, says Stenken, “that someone relying solely on Social Security for retirement income could be looking at a tough retirement financially.”
A tectonic shift is underway
Men historically had been the bigger if not only breadwinner in a household and were more likely than women to receive Social Security under their own work record. But the gender gap is shrinking. According to the booklet, the proportion of men who will receive Social Security under their own work record declined slightly from 93% in 1970 to 90% 2018 while the proportion of women who have worked enough to receive Social Security under their own work record increased dramatically — from 63% in 1970 to 86% in 2018.
This represents “a tectonic revolution” in work and retirement, says Landis.
“In past decades, women made up a minority of workers getting their ‘own’ Social Security, as opposed to a spousal payment,” Landis says. “Now women are a full 50% of ‘retired worker’ beneficiaries. Women have independently earned their own Social Security protection and payments.”
That doesn’t mean that spousal payments are obsolete. “Nearly every couple has a higher and a lower earner,” says Landis. “Spousal payments establish a floor payment level even for the lower earner in a couple.”
It’s time for a Social Security fix
Social Security is not sustainable over the long term at current benefit and tax rates, according to the booklet. Among other facts and figures, the booklet notes that in 2010, the program paid more in benefits and expenses than it collected in taxes and other noninterest income. And the 2019 Social Security Trustees report projects this pattern to continue for the next 75 years.
What’s more, the Trustees estimate that Social Security’s trust fund reserves will be depleted by 2035. At that point, payroll taxes and other income will flow into the fund but will be sufficient to pay only about 80% of program costs.
Jim Blankenship, author of “A Social Security Owner’s Manual,” finds some comfort in those projections.
“The outlook is just a bit better than it’s been in recent years,” he says. “Now we’re looking at a depletion in 2035 versus 2033 and the projection is that 80% of benefits would be paid thereafter if nothing changes. It has been 75% or lower.”
Others, however, see problems on the horizon.
“Demographically, we simply have more older retirees and fewer younger workers,” says Landis. “That means we need to increase Social Security income through taxes, and/or decreased payouts in benefits.”
The ratio of 2.8 workers paying Social Security taxes to each person collecting benefits in 2018 will fall to 2.2 to 1 in 2036.
For his part, Landis says Congress needs to close the funding gap.
Robert Powell is the editor of TheStreet’s Retirement Daily www.retirement.thestreet.com and contributes regularly to USA TODAY. Got questions about money? Email Bob at firstname.lastname@example.org.