10/18/2012; Karin Feldman and Shaun O’Brien
Social Security is our most important family protection program that works not just for retirees, but also for people with disabilities and children who’ve lost a working parent. It’s a promise for all generations. People pay for this benefit throughout their working lives. Social Security is immensely popular with voters across the political spectrum, which is why those who would like to dismantle the program consistently distort the facts and falsely claim the program is “bankrupt.” It’s important for working people to know the truth about the program and push back against Social Security myths and lies and fight for more, not less retirement security.
Here are six Social Security facts you need to know:
- Working Families can count on Social Security for decades to come. Social Security can pay 100% of promised benefits until 2033. Without any changes, the system can pay three-fourths of promised benefits every year after that. See “A Summary of the 2012 Annual Reports” from the Social Security and Medicare Boards of Trustees.
- While Social Security benefits are modest, they’re a big deal to most people. The average annual benefit paid to retired workers is about $14,800 today. Among people 65 and older receiving benefits, two-thirds of them count on Social Security for 50% or more of their income. More than one-third of them get 90 cents of every dollar of income from Social Security. See “Income of the Population 55 or Older, 2010” from researchers at the Social Security Administration.
- Social Security has become increasingly important because people can’t count on pensions or retirement savings. Just 15% of workers in the private sector have a real pension at work. Just 60% of families closest to retirement (ages 55 to 64) have any retirement savings at all in a 401(k), IRA or similar account. Even a $100,000 account, for a couple retiring at age 65, translates into just about $400 per month in income. See “Changes in U.S. Family Finances from 2007 to 2010: Evidence from the Survey of Consumer Finances.“
- Raising the retirement age is a big benefit cut for all workers. If Social Security’s full benefit age were increased to 69 (from 67 today), a worker who would have gotten $12,000 a year retiring at 67 under current law would see her benefits cut by nearly $1,600 per year. See “Cuts in Retirement Benefits Resulting from Raising the Retirement Age to 69” from Strengthen Social Security.
- Wealthy earners don’t pay the Social Security tax on all their earnings. The Social Security contribution tax, which shows up as the OASDI contribution on your annual W-2 form, doesn’t apply to earnings above $110,100 in 2012 ($113,700 beginning in 2013). That means a $1 million earner is paying under 1% of his or her earnings to support Social Security in a typical year, compared to the 6.2% of anyone making $110,100 or less contributes. Scrapping the cap so that all earnings are subject to the payroll tax would go a long way toward closing Social Security’s entire projected 75-year funding gap. See 2012 Social Security Changes from the Social Security Administration for information on the tax cap. Also, see the Social Security Administration’s analyses of proposals by Sen. Tom Harkin (Iowa) and Sen. Bernie Sanders (Vt.) that scrap or raise the cap.
- Proposals to make the annual cost-of-living adjustment (COLA) “more accurate” cut benefits for today’s retirees. Changing the way benefits are adjusted, such as by using the “chained Consumer Price Index,” actually make the COLA less accurate because it does not adequately take into account the health care costs paid by Social Security beneficiaries. The impact will snowball for today’s retirees. By age 80, an average earner getting the lower COLA every year in retirement would have lost $8,100 in lifetime benefits, and if she lives to 90, the total cut adds up to more than $19,000. See “Cutting the Social Security COLA by Changing the Way Inflation Is Calculated Would Especially Hurt Women” from experts at the National Women’s Law Center.