Social Security is 80 Years Old
On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. This was in the middle of the Great Depression and the goal was to protect citizens against job loss and poverty during old age.
In 1938, 78% of Americans approved of the Social Security system.
The Social Security Administration's slogan for this year is "Celebrating the Past and Building the Future." As we celebrate this 80th anniversary, I surveyed my friends to see what they know about Social Security. Outside of the fact that “it is a check you receive when you retire," they didn't know much. The system is a little more complex than that and is designed to be more than a check paid out during retirement, so I thought it befitting to shed some light on the institution.
What is Social Security?
Social Security is a government system instituted in the U.S. to help protect the most vulnerable members of society from living in poverty. The system provides monetary benefits to retirees, disabled individuals, and, potentially, their families.
The system is funded by the payment of Social Security tax. In 2015, both employers and employees pay 6.2% each (up to the earnings cap of $118,500) into the system. So, if your earnings are $118,500 or more for the year, both you and your employer pay $7,347 in Social Security tax (that’s $14,694 total). The monies collected are paid out to those receiving benefits. It is estimated that one in four households receive Social Security benefits. You should review your earnings statement annually. Click here to request yours for free today.
What does the future hold?
Although we do not have crystal balls, a Gallup Poll released on August 13, 2015, indicates Americans doubt the stability of the system:
- 51% of non-retirees doubt they will receive Social Security benefits
- Those who have retired are worried their benefits will be cut
- Two-thirds of those surveyed believe Social Security is in crisis or has major problems
I found it both interesting and alarming that only 17% of the respondents between ages 18 to 29 believe the system is in crisis versus 33% of the respondents between the ages of 30 to 49. The Social Security Administration estimates that the system will not be able to pay full benefits effective 2034. Ultimately, this means we should not depend solely on Social Security as a means to retire comfortably. The younger you are, the more time and responsibility you have to save now. You owe it to your future self and your loved ones.