Before we discuss Social Security, we should understand how the program came to be. It all started with a simple concept, created against the backdrop of the Great Depression. President Franklin D. Roosevelt promised the American people “some measure of protection … against the loss of a job, and against poverty-ridden old age.”
The first Social Security retirement benefit was issued to Cleveland motorman Ernest Ackerman, who retired the day after the program began. He contributed one nickel to the program, and because lump-sum payments were issued from 1937-1940, he received his lifetime retirement benefit in one check – for 17 cents.
The first monthly check was issued to Ida May Fuller in 1940 for $22.54. She lived to be 100 years old, collecting more than $22,000 in benefits.
How It Began: Early Controversy
Putting Roosevelt’s promise into practice has never been simple. The program, especially in the early days, was constantly forced to evolve. One thing that hasn’t changed about the program is its tendency to attract controversy.
Publisher William Randolph Hearst was one of the program’s most prominent critics. He expected newspapers he controlled to publish unfavorable stories about Social Security, along with all of Roosevelt’s New Deal programs. On the eve of the 1936 presidential election, the Hearst syndicate was especially vicious regarding an early proposal to issue each citizen a metal nameplate.
Commissioner Arthur J. Altmeyer rejected the idea almost immediately, deciding to issue the cards we’re familiar with today. But that didn’t stop Hearst from launching a campaign that insisted Roosevelt’s Social Security policy would force each U.S. citizen to wear military-style dog tags.
You can imagine the implications.
Only one of these nameplates was created, in Altmeyer’s name, as a sample. It does look a lot like a dog tag. Altmeyer kept it in his desk throughout his career, and it’s currently on display at the SSA headquarters in Baltimore.
How It Began: Early Mistakes
Another constant are the widespread attempts to abuse the program. One of the earliest examples of this occurred in 1938, when a New York wallet manufacturer promoted its product by showing how well Social Security cards fit inside. Problem was, a company executive used a copy of an actual card in the promotion – belonging to his secretary, Hilda Schrader Whitcher.
The wallets, complete with Whitcher’s Social Security Number, were sold by department stores across the country. Five years later, 5,755 people were using the number. In all, more than 40,000 people have tried to file using 078-05-1120, and there were 12 still using it in 1977. Let’s just say Mrs. Whitcher spent a chunk of her golden years getting to know the FBI.
Why Social Security Is Important?
From its inception, it was clear Social Security is not perfect. But the program has not only survived, its role today has never been greater. People rely on Social Security benefits, which accounted for 35 percent of the income of those 65 or older in 2013 (the most recent available data). This represents a 13 percent increase from 1963.
Social Security Questions:
Now that we all understand the importance of Social Security, let’s continue by addressing some of the most common questions people have when trying to understand their benefits.
- Will Social Security Still Be There for You?
- How Are My Benefits Determined?
- How Do I Decide When to Collect?
- How Do I Use Spousal Benefits?
- How Do Survivor Benefits Work?
First, let’s address the question that seems to be on everyone’s mind:
Will Social Security be there when I need it?
There is a lot of information out there today telling you the system is broken, or even worse. Though most would probably agree that concerns about the program’s sustainability are legitimate, the controversy has created some misconception.
So it’s a good idea to take a quick look at some information from the program’s trustees, who publish an exhaustive report every year. Here are some of the report’s findings.
- Reserves Projected to Pay Full Benefits Until 2034
- Trust Income Projected to Cover 72% of Benefits from 2034 Until 2089, Eve If Nothing Is Changed
- A 55-Year-Old Today Won’t Likely Have To Worry About His Or Her Benefits Being Effected Until Age 73 At The Earliest
Like I said, there are legitimate concerns about the program’s sustainability. Here are some of the reasons prompting concern for Social Security.
- Retiring Baby Boomers Will Strain Reserves
- Life Expectancy Continues To Increase
- Ratio of Workers To Beneficiaries Is Shrinking
Possible Changes:
- Increase of Social Security Tax Rates
- Higher Maximum of Earnings Subject To Social Security Tax
- Increase of The Full Retirement Age
- Decrease of Future Retirement Benefits
- Reduction of Future Cost-of-Living Adjustments (COLAs)
For the 42.4 million retired workers receiving a monthly benefits check, there’s probably no social program more important in this country than Social Security. The data suggests this is true as well, with the Social Security Administration finding that 62% of seniors rely on the program to provide at least half of their monthly income. Without Social Security, it’s likely that the poverty rate for seniors would be significantly higher.
Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.
If you would like to discuss your strategies please email us at info@commonfinancialsense.com
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