For all the concerns about the viability of the Social Security system, it is still a very important part of most people’s retirement planning. But when and how you access those benefits can make a big difference. Tracking your SS account and projected benefits. Pros and cons of taking benefits as soon as possible. As late as possible. What to look out for. Watch out for scams. Preparing for what SS won’t cover. Government contact information and free resources that can help. Possibly a calculator/assessment tool.
The Birth of Social Security
Most of us probably think that Social Security was the first economic plan to bolster incomes for the masses. But such programs were documented as far back as medieval Europe, when feudal lords were responsible for the economic survival of the serfs working on their estates. Those were followed by merchant guilds and fraternal organizations that provided some sort of economic security to certain segments of society.
In America, government got into the act when the early colonists brought their ‘poor laws’ from England, a form of taxation on the wealthier folks to help support the destitute. As our country developed and our ancestors immigrated to our shores, the strain on that system led to almshouses and poorhouses. Then, during and after the Civil War, the government created a program to help war vets and their families. And by 1882, the first company-provided ‘old age’ pensions were created by piano and organ manufacturer, the Alfred Dolge Company.
State welfare pensions came into being around 1930, and some 30 states had developed them by 1935, but they were woefully inadequate. When the stock market crashed in 1929, the unemployment rate rose to more than 25%; 10,000 banks failed; and our economy tanked, creating the Great Depression. That had widespread devastating consequences, but especially on the elderly, half of whom didn’t have enough income to support themselves.
That economic catastrophe was exacerbated by the changes in America due to:
- The Industrial Revolution, as machines began to replace workers, leading to increasing unemployment
- The urbanization of America—family farms began to disappear, and workers migrated to cities, breaking up ‘extended families’ who, traditionally, cared for their senior elders
- Medical science enabled us to live longer, therefore, using up more resources. In 1929, average life expectancy for Americans was 57.1 years; today, that number—while decreasing the last few years (due to a rise in drug overdoses, suicides, and liver disease) that number is 81 or women and 76 for men.
Those events led to a variety of state and local government programs to help stabilize the economy, create jobs, and support the elderly. Several welfare programs were enacted, and many more were proposed. But in 1934, President Franklin D. Roosevelt introduced his economic security pan based on social insurance rather than welfare assistance. The plan was to create a work-related, contributory system in which workers would provide for their own future economic security through taxes paid while employed. The Social Security Act was adopted in 1935.
The plan has evolved over the years, with changes to the retirement age in the 1983 Amendments, which provided for a phasing-in of a gradual increase in the age for collecting full Social Security retirement benefits—from 65 to 67. Social Security has been threatened with extinction, yet it remains a source of supplemental—and sometimes, the only income—for folks in their golden years.
#1: Know your Social Security Facts
Take this quiz from AARP to see how Social Security-savvy you are!
#2: Tips for Couples
- If your incomes are similar and your life expectancy is long, consider delaying your claims to maximize your lifetime benefits
- If your incomes are vastly different, determine if your spousal benefit is better than claiming your own
- If your life expectancies are shorter than average, you may want to consider claiming earlier
#3: Pay Attention to Social Security Law Changes
For example, the payroll tax earnings cap went up from $128,400 in 2018 to $132,900 for 2019. That means, once you’ve reached that earnings level, your Social Security tax stops for that year.
#4: Will your State Tax your Social Security Benefits?
These 13 states do: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia.
Fun Facts about Social Security!
- The first monthly Social Security check was sent out in 1940 to Miss Ida May Fuller of Brattleboro, Vermont. And she received the grand sum of $22.54 (that adds up to about $414 today)
- When you die, so does your Social Security number
- Last year, 67.9 million people received some type of Social Security benefit
- In 2018, 5.6 million people began receiving benefits
- Women comprise 55% of adult Social Security beneficiaries
- Annual Social Security benefits are equal to the size of Mexico’s economy—around a trillion dollars
- If you decided you took your benefits too early, you can undo your claim within the first 12 months of enrolling…if you pay back every cent you’ve received from Social Security
- Social Security is not broke yet! Last year, the program ran a $2.89 trillion surplus, but all other things being equal, benefits may have to be decreased by some 25% by 2034
92% of workers currently in their 40s say they expect to continue working part-time in retirement, according to a survey from TD Ameritrade, and 52% of those in their 70s are still working in at least some capacity.
A survey conducted by Nationwide found a full 92% of Americans couldn’t identify the factors that would give them the maximum benefit
Costly Social Security Mistakes
- Receiving benefits too early
- Remarrying without understanding the consequences
- Not knowing your spousal benefits
- Failure to double-check you Social Security earnings
Medicare for 2020
Find out what your Medicare options are in your state:
4 Primary Plans
Part A — Free hospital coverage for the first 60 days, with a $1,354 deductible for 2019
Part B — Doctors and outpatient services, which come with a $135.50 monthly premium this year (can be higher, if your income exceeds $85,000) and a $185 annual deductible. You are responsible for 20% of your costs.
Part C — Medicare Advantage plans provided by private insurers, and which often bundle together parts A and B and most likely D into one comprehensive plan. Some cover dental and vision care; some provide for wheelchair ramps and shower grips for your home, meal delivery and transportation to and from doctors’ offices. Most provide prescription drug coverage. The plans are generally health maintenance organizations (HMOs) or preferred provider organizations (PPOs).
Part D — Prescription drugs, available through private insurers and require some premiums and other out-of-pocket costs, copays for each medication, and may include an annual deductible.