Social Security is a vital program that provides financial support to millions of Americans. In 2024, the Social Security Administration (SSA) will pay out $1.5 trillion in benefits to about 70 million people. For many retirees, these checks are the foundation of their retirement income, with 1 in 7 recipients relying almost exclusively on them.
The first Social Security payment was made to Ida M. Fuller in 1940 for $22.54. Since then, benefits have increased significantly.
In the early days, any increase required congressional approval, which led to periods without benefit hikes. However, since the 1970s, benefits have been adjusted annually based on inflation data from the Bureau of Labor Statistics. For example, next year’s Cost of Living Adjustment (COLA) will be 2.5%.
Sixty years ago, in 1964, the average monthly SSA benefit for retired recipients was $77.57. At that time, the average annual salary was just under $4,000. This means that SSA benefits covered about 25% of the average worker’s income.
Fast forward to 2024, and the average monthly SSA benefit for retirees is $1,918, while the average annual salary is around $64,000. Today, SSA checks account for approximately 36% of the average worker’s income. Despite this apparent growth, the Senior Citizens League (TSCL) estimates that seniors have lost more than 30% of their actual purchasing power since 2000.
Social Security benefits various retirees
This is because the SSA uses inflation data that doesn’t align with retirees’ spending habits. Although there have been calls to adjust this, significant changes have yet to occur.
Social Security remains a crucial source of income for many retirees, but challenges such as inflation and purchasing power loss persist. Continued advocacy and potential legislative changes could help ensure that these benefits maintain their value for future retirees. It’s important to understand how Social Security works, especially when it comes to spousal and survivor benefits.
For example, if you are married, you receive either your earned benefit or 50% of your spouse’s earned benefit, whichever is higher. If your spouse passes away, you are entitled to 100% of the higher of the two benefits. This ensures that even if you haven’t accrued enough credits on your own, you won’t be left without support.
Another key point to remember is that delaying Social Security benefits until age 70 often maximizes the payout. The benefit increases for each year you delay beyond full retirement age, providing a substantial financial advantage over claiming early. Social Security encompasses more than just retirement income.
It also includes disability benefits and survivor benefits, although these might be lower compared to private insurance options. Additionally, survivor benefits support underage children and spouses caring for them. Understanding these aspects of Social Security enables you to make informed decisions about retirement planning, ensuring that you maximize your benefits and secure your financial future.
While there are concerns about the long-term sustainability of the program, it’s unlikely that Social Security will disappear entirely. However, changes such as higher taxes or adjusted retirement ages may be necessary to maintain the program’s solvency.
