1935 - Social Security Act signed into law
- Provides benefits to retirees in certain job categories
- Job category exclusions exempt nearly half of the working population, e.g., agricultural labor, domestic service, and many teachers, nurses, and hospital employees
- Nearly two-thirds of all African Americans in the labor force, and just over half of all women employed, not covered
- Poverty rates among senior citizens exceed 50 percent
1937 - Social Security Cards issued by post offices
- 20 million issued in first year
1940 - First monthly payment to Ida May Fuller of Ludlow, Vermont
- Collects $22,888.92 in benefits over lifetime, but contributes only $24.75
- Because Social Security is a ‘pay-as-you-go’ system, each generation of current workers pays the benefits of current retirees.
Ida May Fuller with her first monthly Social Security check
1972 - Congress approves annual benefit cost-of-living increases
1975 – Social Security Trustees issue warning that ‘pay-as-you-go’ system not sustainable
1977 - Congress passes legislation to address financial problems
- Increase payroll tax
- Increase amount of income eligible for payroll tax
- Reduce some benefits
Early 1980s – Social Security faces serious funding problems yet again
- Alan Greenspan heads commission to examine the problem
- Congress passes legislation raising retirement age from 65 to 67 and increasing Social Security tax rates
National Commission on Social Security Reform (The Greenspan Commission)
2010 – More wealth in hands of Americans aged 55 to 75
- Dramatic reversal from 1950s when those 65 and older had highest poverty rate
Program Today
- Funded primarily through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA)
- With a few exceptions, all salaried income up to a specific amount is subject to payroll tax.
- Maximum amount of taxable income is $127,200 for 2017. Income above this not taxed
- Social Security expenditures totaled $897 billion in 2015
Outlook – Significant funding issues remain for three reasons
- Baby boomers, an unusually large cohort, reaching traditional retirement age
- Life spans are longer, so retiring baby boomers will have longer retirements
- Fertility rates decreasing so fewer workers to support pay-as-you-go model
Source: Forbes Magazine, Wikipedia, Social Security Administration
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