Social Security has been a consistent source of retirement income since it was established in 1935. We all have some idea of how it functions, but here are some facts you might not have been aware of:
1. Social Security is a major source of retirement income for 62% of current retirees.
2. In an average month, 48.2 million people ages 62 and older receive a retirement benefit from the Social Security Administration.
3. The Social Security trust fund is huge. At $2.8 trillion at the end of the first quarter of 2016, it exceeds the gross domestic product (GDP) of every economy in the world except the five largest: the U.S., China, Japan, Germany, and the U.K.
4. You don’t have to work long to be eligible. If you were born in 1929 or later, you need to work for 10 or more years to be eligible for benefits.
5. Benefits are based on an individual’s average earnings during a lifetime of work under the Social Security system. The calculation is based on the 35 highest years of earnings. If an individual has years of low earnings or no earnings, Social Security may count those years to bring the total years to 35.
6. There haven’t always been cost-of-living adjustments (COLA) in Social Security benefits. Before 1975, increasing benefits required an act of Congress; now increases happen automatically, based on the Consumer Price Index. There was no COLA increase in 2016, but there was an increase of 0.3% in 2017.
7. Social Security benefits are subject to federal income taxes — but it wasn’t always that way. In 1983, Amendments to the Social Security Act made benefits taxable, starting with the 1984 tax year.
8. Social Security recipients received a single lump-sum payment from 1937 until 1940. One-time payments were considered “payback” to those people who contributed to the program. Social Security administrators believed these people would not participate long enough to be vested for monthly benefits.
9. In January 1937, Earnest Ackerman became the first person in the U.S. to receive a Social Security benefit—a lump sum of 17 cents.
You can check your Social Security earnings and see an estimate of your benefits by creating an account at www.ssa.gov