January 31st, 2015 marks the 75th anniversary of the very first Social Security monthly benefit check. Ida May Fuller paid into the Social Security system between its inception in 1937 up to her retirement at the end of 1939. She paid in a total of $24.75 and her very first monthly benefit check was $22.54, so she received almost all her contributions back in the first month of her retirement. Ida May went on to live to age 100 and collected about $23,000 during her retirement years. Ida May was clearly a huge beneficiary of the then new Social Security system.
In modern times it is not possible to see such a disproportionate situation between what a worker pays into the system and what they eventually get out. In fact, we have reached a point where the “average” worker with an “average” life span will receive fewer benefits from the system than what they paid in over their working lives.
What Can You Expect?
An average couple retiring in 1990 paid into the system about $316,000 and received back about $436,000 in benefits. A couple retiring in 2010 paid in about $600,000 and is expected to receive about $580,000, so it is about even, but a couple retiring in 2040 is expected to have paid in about $808,000 and will receive back about $703,000. Basically, the higher your average income over your working life, the worse of a “deal” Social Security becomes. But this is intentional. For those who have read previous blog posts you know that the system replaces a much higher percentage of low wage earners income as benefits than it does for higher wage workers. This is the social safety net feature of the system. It was never intended to be the primary retirement plan for people, but rather a safe floor that prevented people from falling below the ability to live basically after retirement.
Even though none of us are going to get as good a deal as Ida May did back in 1940, the Social Security system has survived for a very long time and has become entrenched as one of the key basic features of our society. Adjustments need to be made, but the system has accomplished most of the main goals envisioned by Roosevelt during the last 75 years.
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