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Social security might be one of the most misunderstood benefits for older adults, which certainly seems odd since so many people receive it. An impressive 97% of those aged 60-89 are currently receiving or will receive Social Security benefits, according to the Social Security Administration. In January 2020, 65 million Americans – or one in every six people – collected Social Security benefits. The vast majority of those Americans were senior adults[1]. Since Social Security was established on August 14, 1935, this social program has been incredibly popular and effective.
Since so many people are beneficiaries of the program, it’s important to understand as much of it as possible. Let’s start with the top 10 things to know about this social safety net.
#1. Social Security Payments are Modest
In January 2020, the average Social Security benefit was $1,614 each month[2]. That works out to about $19,370 per year. Most individuals can’t count on Social Security to replace enough of their income, as recipients who retire at age 65 only get about 37% of their previous income, on average[3]. According to the Center on Budget and Policy Priorities, this places the United States right at the bottom third of countries across the world in how much of a person’s income is replaced by their retirement pension.
There are some things that can lower the monthly benefit even more; one of the most common is Medicare’s Supplementary Medical Insurance. Also known as Medicare Part B, the premiums for this supplemental form of Medicare can be deducted from Social Security checks, so that the recipient never has to worry about paying it in a separate bill. However, healthcare costs keep rising faster than the rate of inflation, which means that even with a cost of living increase, the recipient of Social Security might see their checks going down.
#2. You Don’t Have to be Elderly to Get It
Though Social Security is well-known for being something you receive after you retire, it’s not just older adults who get it. Those who are disabled qualify for Social Security. This is known as SSDI, or Social Security Disability Insurance, and it’s for those who are significantly disabled to the point of being unable to work, as well as their dependents. This provides a valuable safety net to help ensure that those among us who can’t work can still receive some sort of income that will keep them from falling into poverty.
Children can also qualify. In 2019, 6.5 million children under the age of 18 lived in a household that received Social Security income. Among those children, 2.8 million were dependents of retired, disabled, or deceased workers. The average monthly benefit for those individuals was $688[4].
Just as you don’t have to be among the population of seniors to qualify for Social Security, you don’t have to be elderly to benefit from a medical alert pendant or watch. These incredible life-saving devices are for everyone, including those who are disabled, those who worry about living alone (no matter their age), and those who want some extra peace of mind that if an accident or serious incident occurs, they can reach out for help at the touch of a button.
#3. Remarriage Doesn’t Have to End Your Benefits
There has long been the assumption that if an older person chooses to remarry following the death of a spouse, they will no longer be eligible for payments as the surviving spouse. The truth is that remarriage doesn’t have to end your benefits – it just depends on how old you are when you choose to remarry. If you remarry before the age of 60, you will lose your survivor’s benefit. However, if you remarry after you turn 60, you can continue to receive those benefits[5].
#4. Social Security Rises with Cost of Living
Though the increase is usually rather modest, Social Security does go up every year with a cost of living increase. Benefits rise to keep pace with inflation, helping ensure that the recipient doesn’t fall into poverty as the economy shifts over the years. In 2022, recipients saw a cost of living increase of 5.9%, which was the greatest increase in the last 40 years of the program. Though that was a nice boost, it wasn’t quite enough; by March 2022, inflation outpaced the cost of living increase, which could mean an even larger increase in 2023[6].
#5. Social Security is More Than Just a Retirement Benefit
Though retirement benefits are what Social Security is best known for, that’s not all it does. Many workers earn life insurance through their payroll tax contributions. For instance, about 96% of those between the ages of 20 and 49 earned life insurance protection in 2020[7]. For those with average earnings, a spouse, and two children, they earned the equivalent of an $800,000 life insurance policy.
There’s also the disability portion of Social Security. About 89% of those aged 21-64 in 2020 were insured in case of severe disability. Why does disability coverage and life insurance matter? Because about 7% of individuals will die before they reach retirement age, thus leaving their spouse and children with nothing from their anticipated income (unless they have private life insurance coverage). The percentage of those who will become disabled is even greater than that[8]. Thus, Social Security becomes a safety net for those who are much younger than retirement age.
#6. Add in a Spouse’s Benefit and Things Get Confusing
When it comes to the question of spousal benefits, to say things might get confusing is an understatement. The Social Security Administration spells out the information on spousal benefits here. However, let’s look at this quote from the SSA blog to give you an idea of what you might expect[9]:
“Your full spouse’s benefit could be up to 50 percent of your spouse’s full retirement age amount if you are full retirement age when you take it. If you qualify for your own retirement benefit and a spouse’s benefit, we always pay your own benefit first. (For example, you are eligible for $400 from your own retirement and $150 as a spouse for a total of $550.) The reduction rates for retirement and spouses benefits are different. If your spouse is younger, you cannot receive benefits unless he or she is receiving benefits (except for divorced spouses). If you took your reduced retirement first while waiting for your spouse to reach retirement age, when you add spouse’s benefits later, your own retirement portion remains reduced which causes the total retirement and spouses benefit together to total less than 50 percent of the worker’s amount.”
Confusing? You bet it is. But keep in mind that there is always help for the more confusing aspects of Social Security. You can get in touch with someone in three ways:
· The Social Security Administration website
· Via phone: 1-800-772-1213
· Your local Social Security office
#7. Social Security Lifts the Elderly Out of Poverty
There’s no doubt that Social Security serves as a strong social safety net. So much so that without those benefits, about 40% of adults aged 65 and older would fall below the poverty line[10]. A study from the U.S. Census found that in 2012, 30% of older adults would have been below the poverty line without the help of Social Security. The program lifted over 10 million older adults out of poverty.
When you’re on a fixed income, it can be tough to figure out what you need to pay for and what you can let slide. But among those things you really need to pay attention to, keeping a roof over your head and the utilities paid is certainly among the top tier. Another important point is your own safety and security. This might include taking care of fall risk issues in your home in the interest of fall prevention, eating well and exercising to stay as healthy as possible, and opting for a medical alert system with fall detection that will be with you at all times, even in the shower. Fortunately, this sort of peace of mind is quite affordable and can help keep you from incurring high medical bills in the aftermath of an emergency.
#8. It’s Retirement Protection That Encourages Greater Savings
Social Security provides a strong foundation for retirement income. It allows recipients to make more income or have assets without worrying about exceeding a certain income or asset level and seeing their benefits denied or reduced because of it. Therefore, Americans are encouraged to sink savings into private retirement funds, take advantage of pensions, and generally save for retirement in whatever ways make the most sense for them, without worry that they won’t get Social Security benefits if they do.
The annual payout of Social Security is more than that of most private retirement plans for many reasons, including that the funds are steady (with no lump-sum payments), the risk pool is not limited to certain individuals, and the administrative costs are only about 0.6% of the annual benefit – that’s significantly lower than the administrative costs of most private retirement funds[11].
But besides that, Social Security has won wholeheartedly in the court of public opinion, and that trickles down to political support. When all your constituents are recipients of Social Security or expect to be in the future, the program is bound to survive even choppy political waters. According to the National Academy of Social Insurance, most Americans don’t mind paying into Social Security because they understand the value of it for society.
#9. Social Security is the Majority Income for Most Older Adults
Though workers are always encouraged to save money for retirement, the truth is that many of them don’t. As a result, Social Security provides the majority of income for older adults; for about 50% of them, it provides half their income, and for about 25% of older adults, it provides at least 90% of their income. For those who don’t bring home a pension or have investment accounts, about 25% live on less than $20,000 (according to 2015 numbers)[12]. So while it’s obvious that Social Security matters a great deal, for some individuals, it matters even more than you might think at first blush.
#10. The Program is In Trouble – But You Might Never Notice
Unfortunately, it’s not all smooth sailing for Social Security. Though the program has collected more in taxes and income each year than it has paid out in benefits and now has funds of about $2.9 trillion, those funds will be exhausted by 2034 if there are no changes to Social Security[13]. That’s because as Baby Boomers retire, they will make up a massive number of new individuals who receive Social Security benefits, thus placing a heavy burden on the current funds. However, after 2034 the government would still be able to pay about 75% of the scheduled benefits by sending out the payments as the taxes are collected from younger workers[14].
But there’s good news! Policymakers recognize the potential for issues with Social Security in the future and are strongly committed to making sure that every American has the benefit of the program they’ve paid into throughout their working years. So look for good changes to Social Security in the near future as the politicians figure out what it will take the keep the program strong for future generations.
Remember that Social Security is one of the wonderful safety nets for older generations. And those safety nets are important, because they do everything from make you more comfortable to provide peace of mind to even help you live longer. To that end, now is the time to make sure your safety nets are all intact by looking at aging in place home modifications and obtaining a medical alert device, if you don’t have one already. Medical alert technology can take the form of pendants, watches, wristbands, and even things like connected smoke detectors and medication reminders. If you or a loved one wants a bit more peace of mind in your golden years, look to Alert1 Medical Alert Systems for that extra protection.