The History of Your Social Security Payments

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SeaBreeze

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The history of how and why Social Security started and what changes have occurred over the years. Full article here.

The Social Security program was created in 1935 and began paying out monthly benefits to retired workers five years later. But there have been several important adjustments to the program, including changes in the retirement age and increases in benefits to keep up with inflation. Here's how Social Security has changed over nearly 85 years.

What Is the Social Security Act?

President Franklin D. Roosevelt signed the Social Security Act on Aug. 14, 1935. The law created a program that would pay monthly benefits to retired workers starting at age 65 or older. The act also established a payroll tax to fund the program, and required employers to withhold the tax from employee wages.

When Was Social Security Established?

Regular monthly payments to retirees began in 1940. The first monthly retirement check was issued to Ida May Fuller of Ludlow, Vermont for $22.54 in January 1940. Fuller, who worked as a legal secretary, collected payments until age 100 in 1975. Monthly payments to retired workers have continued since then and increased to an average of $1,464 per month in January 2019.

Why Was Social Security Created?

This government program was founded during the Great Depression, a time of widespread unemployment and poverty among the elderly. Urbanization led to an increasing proportion of Americans living and working in cities apart from their extended family. Better health care and public health policies increased the life expectancy of the typical American. The federal government created the Social Security program "to provide for the general welfare by establishing a system of Federal old-age benefits," according to the preamble to the 1935 Social Security Act.

When Did Spousal and Child Payments Begin?

Amendments to the Social Security program in 1939 added payments to the spouse and minor children of retired workers and benefits for survivors of prematurely deceased workers. Spouses continue to be eligible for up to 50 percent of the higher earner's benefit, if it's greater than the payments due based on their own work record. Dependent children under age 19 can also claim payments. "Participating in Social Security provides core protection for all of our children," says Eric Kingson, a professor of social work at Syracuse University. "It's life insurance, in effect."

How Has the Social Security Retirement Age Changed?

The original age to claim Social Security payments was 65. A 1961 law allowed workers to begin claiming permanently reduced Social Security payments as early as age 62. "Anytime from 62 on you could claim, but the benefit was reduced proportionally to how much earlier you did start to claim," says John Palmer, a Syracuse University professor and former public trustee for the Medicare and Social Security programs. "Now a majority of people opt to start claiming at 62."

A 1983 law raised the full retirement age to 66 for most baby boomers and 67 for people born in 1960 or later and increased the reduction in monthly payments for people who sign up before their full retirement age. Provisions were also added to increase payments for retirees who delay claiming benefits past their full retirement age up until age 70.

When Did Social Security Benefits Become Taxable?

Part of Social Security benefits became taxable for people who earn above a certain amount beginning in 1984. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit exceeds $25,000 for individuals and $32,000 for couples, up to 50 percent of your Social Security benefit is subject to income tax.

If these sources of income top $34,000 for individuals and $44,000 for couples, 85 percent of your Social Security payments may be taxable. "The thresholds that are set up are not indexed to inflation, so more people will have some portion of their Social Security income be subject to taxation," Palmer says.
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The title stirred me to look at the maximum Social Security payments that I could receive if I retired at age 62.... today. I was surprised to see that given my salary history and the age 62 retirement, the amount I am receiving is exactly right on at $18,000/yr.

I never thought about it before, as I didn't think I had paid in the max, but I guess it worked out well. Jeanie didn't work the required number of quarters (in a paying job)... but four kids kept her pretty busy, and the jobs she held in the meantime, certainly helped.

Long and short of it is that at 83, we've been retired for 30 years and the total that we collect is $27,000/yr. It certainly helps

In todays dollars, that would be 30 X $27000, or $810,000.

Something to be thankful for, and to consider in your retirement planning.

Or maybe my calculations are wrong. :(
 
One of the 'changes' that has occurred is that too many people count on SS as their only retirement income. Of course, there are various reasons for this.
 

When Did Social Security Benefits Become Taxable?

Part of Social Security benefits became taxable for people who earn above a certain amount beginning in 1984. If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefit exceeds $25,000 for individuals and $32,000 for couples, up to 50 percent of your Social Security benefit is subject to income tax.

If these sources of income top $34,000 for individuals and $44,000 for couples, 85 percent of your Social Security payments may be taxable. "The thresholds that are set up are not indexed to inflation, so more people will have some portion of their Social Security income be subject to taxation," Palmer says.
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There is a lot about the above that really sticks in my craw. Seniors should be up in arms about this. If the AARP would take up this issue I'd be glad to join them, but so far all I hear from them is crickets.

To begin with the thresholds. $25K for single and $32K for a couple. This amounts to a straight up marriage penalty. The threshold for couples should be twice what it is for a single person. If one person can exempt 25K, it stands to reason that two people should be able to exempt 50K.

The next thing, and this is a big one, is the fact that these threshold have not been indexed for inflation. 25K in 1984 is equivalent to $62 K in 2019 dollars. So IMO, the thresholds should be 62K for a single person and $124K for a couple. Make no mistake our politicians know exactly what they are doing with this. For every uptick in inflation the rate of taxation on our Social Security increases. Thus this amounts to a built in stealth cut to our benefits year in and year out as long as there is inflation.

Last, is this idea that up to 85% of our benefits may be subject to income tax. What ever happened to "No double taxation"? Every dime of social security taxes that are taken out of your paycheck while you are working has already been subject to income tax. So why do we have to pay taxes on it again when we get it back? Now I will say, there is justification for taxing up to 50% of your social security as we do not pay any taxes on the amount our employers have to send in as a match. But 85%? No.
 



The income thresholds at which SS is taxed as income were never indexed for inflation... not under Reagan's law [1984] at 50% of SS nor under Clinton's law [1993] when it was raised to 85% of SS.

However, there are now two bills... one in the Senate and one in the House... that would at least address this issue and increase those thresholds.

But these bills will likely never get out of committee. So, if you support these, contact your senators and congressmen.


SR 269

https://www.congress.gov/bill/116th-congress/senate-bill/269

SEC. 104. Increase in threshold amounts and rate for inclusion of Social Security benefits in income.

https://www.congress.gov/bill/116th...69/text#toc-HB4A2B1F468864BD2A097D9AFE11E546C


HR 860

https://www.congress.gov/bill/116th-congress/house-bill/860

SEC. 104. Increase in threshold amounts and rate for inclusion of Social Security benefits in income.

https://www.congress.gov/bill/116th...60/text#toc-H8770DD1988CB4A40AEC77188A4A7417A


 
KingsX said:



The income thresholds at which SS is taxed as income were never indexed for inflation... not under Reagan's law [1984] at 50% of SS nor under Clinton's law [1993] when it was raised to 85% of SS.

However, there are now two bills... one in the Senate and one in the House... that would at least address this issue and increase those thresholds.

But these bills will likely never get out of committee. So, if you support these, contact your senators and congressmen.


SR 269

https://www.congress.gov/bill/116th-congress/senate-bill/269

SEC. 104. Increase in threshold amounts and rate for inclusion of Social Security benefits in income.

https://www.congress.gov/bill/116th...69/text#toc-HB4A2B1F468864BD2A097D9AFE11E546C


HR 860

https://www.congress.gov/bill/116th-congress/house-bill/860

SEC. 104. Increase in threshold amounts and rate for inclusion of Social Security benefits in income.

https://www.congress.gov/bill/116th...60/text#toc-H8770DD1988CB4A40AEC77188A4A7417A
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Contacting them doesn't do any good unless you are one of their big money donors. Otherwise your calls and letters go directly into file 13. There's only way way for the average schmucks to get their attention.

 


Recently the House overwhelmingly bipartisanly passed the "SECURE" retirement bill that would delay RMD to age 72 beginning next year [2020.]

Now that House bill is in the Senate which would also be speedily passing that bill except for a handful of senators [mainly only two] who are intentionally holding it up and may kill it.

I've contacted my senators to let them know I support that House bill.

One of my senators is one of the two holding the House bill hostage !!

Needless to say, I will never vote for him again.

 
What most people don’t know is that our employment tax dollars don’t all buy the same amount of future benefit. Some of our employment tax dollars buy six times as much in benefits as others.

According to the most recent Trustees Report, for instance, the first $767 of “average indexed monthly earnings” (a complex formula that adjusts earnings over time) is credited at a 90 percent rate, assuring the lowest wage workers of a retirement benefit nearly equal to their earned wage.

Wages of more than $767 a month but less than $4,624 a month are credited at a 32 percent rate. This means retirement benefits increase at a much lower rate. The benefit pinching, however, does not end there.

More means less

For wages of more than $4,624 a month up to the wage base maximum ($113,700 for 2013), the crediting rate is only 15 percent. Thus, all the wages earned — and employment taxes paid — over that $55,488-a-year “bend point” gain benefits at only one-sixth the rate of the lowest wage earners.

In effect, the Social Security benefits formula functions as a sharply graduated benefits “tax,” reducing the benefits that accrue to higher wages by 85 percent. The higher your means, the lower your benefit.


 
mathjak107 said:
What most people don’t know is that our employment tax dollars don’t all buy the same amount of future benefit. Some of our employment tax dollars buy six times as much in benefits as others.

According to the most recent Trustees Report, for instance, the first $767 of “average indexed monthly earnings” (a complex formula that adjusts earnings over time) is credited at a 90 percent rate, assuring the lowest wage workers of a retirement benefit nearly equal to their earned wage.

Wages of more than $767 a month but less than $4,624 a month are credited at a 32 percent rate. This means retirement benefits increase at a much lower rate. The benefit pinching, however, does not end there.

More means less

For wages of more than $4,624 a month up to the wage base maximum ($113,700 for 2013), the crediting rate is only 15 percent. Thus, all the wages earned — and employment taxes paid — over that $55,488-a-year “bend point” gain benefits at only one-sixth the rate of the lowest wage earners.

In effect, the Social Security benefits formula functions as a sharply graduated benefits “tax,” reducing the benefits that accrue to higher wages by 85 percent. The higher your means, the lower your benefit.
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I am aware that the formula for determining benefits is progressive thereby providing low wage workers with a higher benefit relative to their average earnings. And I like it just fine that way. It tends to make things more equal in our old age. While the idea that we should instead make social security more like a 401K whereby benefits are dependent of the performance of investments take away the progressiveness and instead favors higher income workers who can afford to save more and may also be more investment savvy. That's why I am very much against any effort to privatize all or any part of social security.
 
Trade said:
I am aware that the formula for determining benefits is progressive thereby providing low wage workers with a higher benefit relative to their average earnings. And I like it just fine that way. It tends to make things more equal in our old age. While the idea that we should instead make social security more like a 401K whereby benefits are dependent of the performance of investments take away the progressiveness and instead favors higher income workers who can afford to save more and may also be more investment savvy. That's why I am very much against any effort to privatize all or any part of social security.
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 social security cannot own anything but bonds .. the gov't can't own stocks. they are forbidden from buying up public companies . that would be Communism , when the gov't controls business
 
KingsX said:


Recently the House overwhelmingly bipartisanly passed the "SECURE" retirement bill that would delay RMD to age 72 beginning next year [2020.]

Now that House bill is in the Senate which would also be speedily passing that bill except for a handful of senators [mainly only two] who are intentionally holding it up and may kill it.

I've contacted my senators to let them know I support that House bill.

One of my senators is one of the two holding the House bill hostage !!

Needless to say, I will never vote for him again.
Click to expand...

I have no idea what RMD means and I'm already 72. So I conclude that I don't have a dog in that fight.
 

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