Social Security is a vital program that provides financial support to millions of Americans. In 2024, the Social Security Administration is expected to pay out around $1.5 trillion in benefits to about 70 million people. For many, these benefits are the main source of income in retirement, with one in seven recipients relying almost entirely on them.
Social Security has come a long way since the first payment of $22.54 was made to Ida M. Fuller in 1940. In the early years, benefit increases required congressional approval, which led to periods without any increases.
This changed in the 1970s when benefits started being adjusted each year based on inflation data from the Bureau of Labor Statistics. In 1964, the average monthly Social Security benefit for retired recipients was $77.57. At that time, the average yearly salary was just under $4,000, so Social Security benefits were about a quarter of the average worker’s earnings.
Average Social Security checks in 2024
Fast forward to 2024, and the average monthly Social Security benefit for retirees is $1,918. Today’s average yearly salary is around $64,000, meaning Social Security checks now make up about 36% of the average worker’s earnings.
However, research by the Senior Citizens League shows that seniors have lost more than 30% in actual purchasing power since 2000. This is because the Cost of Living Adjustment (COLA) doesn’t adequately reflect the spending habits of retirees compared to the general workforce. There have been calls to change how inflation is measured for Social Security adjustments, but these have not gained much traction in Congress yet.
Without changes, the buying power of Social Security benefits could keep going down. While Social Security benefits have gone up in absolute terms over the years, their relative value and purchasing power have not kept up with the cost of living. This could impact future retirees.
The ongoing discussion highlights how important it is to look at both nominal and real values when assessing if Social Security benefits are enough.
