Social Security is a well-known program that provides supplemental retirement income for Americans. However, it also offers benefits to spouses, disabled workers and their dependents. The numbers are staggering Social Security Programs can be quite overwhelming, but they are also very fascinating.
Whether you’re looking for Social Security benefits, are already receiving them, or just curious about the facts and figures, here’s a look at some of the numbers behind the massive government program.
The current program structure means that 2035 will not be a happy year. The Social Security Trust Fund is likely to be depleted in that year. This sounds very alarming and is not a good sign, but it doesn’t necessarily mean Social Security is disappearing.
However, it does mean benefits will be reduced if there are not changes made. It’s possible that Social Security will be modified before then, as it is such a hot political issue. It’s important to consider the possibility that your lifetime benefits might not be what you expect.
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Without Congress taking steps to strengthen Social Security funding in the future, benefits could be reduced by 22% in 2034. Social security is the largest source of retirement income for many retirees. A 22% reduction in benefits could spell doom for them.
With the Social Security Trust Fund expected to run dry, payouts will be dependent on the payroll tax contributions of existing workers. The Social Security program will need to be cut by 22% due to rising retirees relative to workers.
Although Social Security is best known for providing retirement income, it also offers important benefits for disabled workers. The average monthly Social Security benefit for disabled workers was $1,236 as of May 2022. Social Security Disability Insurance was worth $145 billion in 2019, and paid out to 8.2 millions beneficiaries and 1.4million dependents.
According to the Social Security Administration the average retirement benefit paid to qualified recipients in 2022 was $1657. For people who retire at 70 years old, the maximum Social Security benefit is $4,194 per monthly, $3,345 for full retirement age and $2,364 for those who retire at 62.
Social Security retirement benefits can be sized based on many factors, including when your benefits were claimed. While you can start receiving benefits as early at age 62, the full retirement age for most Americans lies at age 67. However, if you wait until age 70 before receiving your benefits, the amount will increase by 8% annually from 67 to 70. The maximum Social Security retirement benefit available in 2022 for top earners is $4,194.
Social Security payouts are subject each year to an inflation adjustment called the “cost-of living adjustment,” or COLA. Social Security beneficiaries have been receiving COLAs between a few percent and even less because inflation has been relatively stable over the past decades. However, 2022 beneficiaries will see an increase of 5.9% in their Social Security payments due to inflation. This is the highest COLA for 40 years.
Social security funding is largely funded by payroll taxes on current workers. High-earners don’t pay tax on any of their earnings. Each year, the Social Security Administration releases the “wagebase” figure. This is the amount of income that Social Security considers taxable. This figure is $147,000 for 2022. The wage base number is subject to an annual revision, just like the COLA for Social Security payments. It is adjusted according to the inflation rate. The wage base for 2022 was substantially higher than 2021’s $142,800.
Social Security benefits are not considered income that is taxable in the majority of states. Twelve states impose income tax on Social Security benefits. These are the 12 states which levy income tax on Social Security benefits.
Not all Social Security income is subject to tax in most states. Kansas, for example, levies a 3.1%-5.7% tax on all income but exempts Social Security income from residents with AGIs up to $75,000. Many other states offer similar exemptions.
According to the Social Security Administration in 2021, 65 million Americans would receive a monthly benefit. A current population of approximately 332million means that close to 20% of Americans receive monthly benefits from Social Security. This number is expected to rise as Americans live longer. It’s also why the Social Security system could be in trouble as soon as 2035.
Although the number of Americans receiving Social Security benefits may be impressive, it is not easy to understand the large sums of money that are being paid out to them. Social Security Administration data show that more than $1 trillion was paid in benefits in 2021. As the number of retired people increases, this number is expected to rise. According to the SSA, a 65-year old man had a life expectancy that was just 14 years in 1940. It is now 20 years in 2021. Social Security will need to fix its funding problem to avoid future cuts as people live longer and receive more in total benefits.
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