20 Social Security Facts for 2020

From: 401kspecialistmag.com

From average benefit amounts to the program’s scope, COLAs and retirees’ dependence on it, here are 20 bullet points filled with interesting, up-to-date tidbits about the largest government program in the world.

Social Security, the largest government program in the world, is projected to pay out $950 billion in benefits for older Americans and another $150 billion on Social Security disability payments this year, according to The Washington Post.

Research shows the entitlement program’s benefits will start to exceed its tax collections in 2020, and the program will deplete its $2.9 trillion reserve fund in 2035 if no action is taken.

As politicians suggest “fixing,” cutting, or even expanding Social Security benefits through a variety of methods (primarily focused on increasing taxes on the wealthy), it is clear the public should expect either smaller benefits, higher taxes or both in the future as the government looks to extend the runway for a program born in 1935 that roughly four in 10 Americans rely on as their sole source of retirement income.

While 401k-focused advisors are constantly striving to lower that percentage by getting more Americans to save in their employer-sponsored retirement plans, the beginning of a new year still seems like a good time for a refresher on some interesting Social Security facts and figures. There could probably be 100, but what follows are 20 bullet points filled some of the most pertinent statistics and projections, divided into some common-theme categories.

Average Benefit Amounts

  • The average Social Security benefit was $1,503 per month in January 2020. The maximum possible Social Security benefit for someone who retires at full retirement age is $3,011 in 2020. However, a worker would need to earn the maximum taxable amount, currently $137,700 for 2020, over a 35-year career to get this Social Security payment.

Source: U.S. News & World Report

  • For a worker who becomes eligible for Social Security payments in 2020, the benefit amount is calculated by multiplying the first $960 of average indexed monthly earnings by 90%, the remaining earnings up to $5,785 by 32%, and earnings over $5,785 by 15%. The sum of these three amounts, rounded down to the nearest 10 cents, is the initial payment amount. Cost-of-living adjustments and delayed retirement credits can boost your payments above this amount.

Source: U.S. News & World Report

  • The average benefit per individual is about $18,024 in 2020. For married couples, it’s $2,531 a month or $30,372.

Source: MLive

  • Among retired workers who collected Social Security benefits based on their own work records, men ($1,627) receive a higher average monthly benefit than women ($1,297).

Source: Social Security Administration

  • There are now only 2.8 workers per Social Security beneficiary compared to 3.3 as recently as 2007. The Social Security Administration estimates Social Security benefits will start to exceed the program’s costs in 2020, and the program will deplete its $2.9 trillion reserve fund in 2035.

Source: MLive

Retirees Counting on It

  • 40.2% of Americans ages 60 and up rely solely on Social Security for retirement income.

Source: National Institute on Retirement Security

  • Unmarried men (39.2%) and women (42.3%) are more likely to rely on Social Security for their sole source of retirement income. That’s in comparison to 23.8% for couples.

Source: National Institute on Retirement Security

  • Social Security is an important income source for 7 in 10 recent retirees. According to Secure Retirement Institute research, it makes up 37% of their total income on average.

Source: Secure Retirement Institute

  • More than one in four workers (28%) expect to rely on Social Security as their primary source of income in retirement, including Boomers (42%), those with household income of less than $50,000 (40%), noncollege graduates (35%), and women (32%).

Source: Transamerica Center for Retirement Studies

  • Only 55% of Millennials are confident that Social Security will provide them with meaningful income in retirement.

Source: Insured Retirement Institute

Source: MLive

  • The income “replacement rate” from Social Security will slip to about 35% for a medium earner retiring at 65 in the future, chiefly because the full retirement age, which has already risen to 66, will climb to 67 over the 2017-2022 period.

Source: Center on Budget and Policy Priorities

Cost of Living Adjustment

  • The 2020 Social Security cost-of-living adjustment (COLA) is 1.6%, which begin with benefits paid to more than 63 million Social Security beneficiaries this month. For an average retiree who gets a monthly check of $1,460, that adds up to an additional $23.40 a month, according to The Senior Citizens League. In 2019 recipients received a 2.8% COLA, or an average $40.90 more each month than in 2018, the most since 2012. But because inflation has moderated over the past year, the COLA increase isn’t as large for 2020.

Source: The Senior Citizens League

  • Social Security benefits have lost 33% of buying power since 2000. TSCL’s analysis found that, over a 10-year period, average Social Security benefits of $1,075 per month in 2009 lost a total of $15,258 in financial growth from 2010 to 2019 when compared to the previous decade when COLAs averaged 3%. By the end of that 10-year period, average benefits were $223 per month lower than they would have been had inflation averaged the more typical 3%. People who have been receiving Social Security benefits since 2009 have only seen a COLA higher than 2.8% one time (in 2012).

Source: The Senior Citizens League

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