Genesis: The Original Social Security Act of 1935 (Old-Age, Survivors, and Disability Insurance (OASDI) programs), signed into law by President Roosevelt on August 14, 1935, originally covered only retirement benefits, and only to the participating workers. Such benefits were initially received in a lump sum at retirement.
Evolution of Social Security: The 1939 Amendments added two new categories of benefits: 1) Payments to spouses and minor children of a retired worker (so-called dependency benefits); 2) Survivor benefits paid to the family in event of the premature death of a covered worker. These changes and subsequent amendments transformed Social Security from a retirement program to a purveyor of multiple social insurance and social welfare programs. (No social commentary implied.)
An Incomplete Retirement Program: Social Security's retirement benefits were never intended to be a complete retirement program. Such monthly benefits only replaces about 40% of the pre-retirement income for the average worker.
Social Security Trust Funds Depletion: Social Security is a "pay-go" program, i.e., current Social Security payroll taxes are used to pay benefits to current beneficiaries with any annual surplus going into established trust funds. Those trust funds are now being depleted in an effort to supplement the scheduled benefits which are now greater than the current taxes collected as more people retire. The trust funds are estimated to become exhausted by 2033. With only payroll taxes supporting current benefit pay-outs, future recipients' retirement benefits will be reduced to approximately 75% of current scheduled benefits.
Social Security Benefits Decision Maze: A prospective recipient's timing and election of Social Security benefits is a complex decision. There are multiple options available to eligible recipients that not only have a significant impact on the amount of benefits received but may potentially impact the benefits available to a spouse and/or dependents.
Social Security Benefits Flow Chart: We have provided a hyper link below to our Social Security Benefits Flow Chart that illustrates, in a rudimentary fashion, available options for key considerations. The eligible recipient should study and possibly seek professional advice prior to the election of Social Security retirement benefits.
Maximizing Social Security Benefits: To read more about maximizing your social security benefits through election timing and the usage of spousal benefits, click the following link to read our blog post entitled Maximizing Retirement Returns through Social Security Elections