Social security is well known as a supplementary retirement income program for Americans, but it also provides benefits to disabled workers, spouses and relatives. The numbers behind Social Security Programs can be overwhelming, but they are also fascinating.
Whether you’re planning your social services, already deducting payments, or are simply interested in the facts and figures surrounding the program, here is a look at some of the numbers behind the massive government program.
As the program is currently structured, 2034 will not be a happy year for social security beneficiaries. In that year, it is estimated that the Social Security Trust Fund will be exhausted. Just because it sounds ominous – and it’s certainly not a good thing – does not mean that social security is disappearing. But this means that unless changes are made, benefits must be reduced. Since Social Security is such a political hot-button, it is likely that some changes will take place before then. However, when planning your lifetime benefits, it is wise to take into account the chance that your benefits will not be quite as you expect.
Unless Congress takes steps to support social security funding, 22% is the amount by which benefits can be cut in 2034. For the many retirees who depend on social security to make up the bulk of their pension funding, a cut of 22 % in services can be devastating. However, with the expected depletion of the Social Security Trust Fund, payments will be dependent on payroll tax contributions from existing workers. With the number of pensioners increasing in relation to the number of workers, this 22% reduction will be necessary without adjustments to the social security program.
Social security is primarily known as a retirement income program, but it also pays important benefits to disabled workers. As of June 2021, the average disabled person received a monthly benefit of $ 1,280 from Social Security. This amounted to $ 10.3 billion in total payments to 8.1 million recipients, with an additional $ 600 million to 1.4 million relatives.
According to the Social Security Administration, the average pension benefit paid to eligible beneficiaries in June 2021 was $ 1,555. This average amount was spread over 46.7 million recipients, for a total payout of $ 72.7 billion. Along with that, 2.9 million relatives received an additional $ 2.34 billion in total benefits.
The size of your social security pension is based on a number of factors, including when you claim your benefits. Although you can start receiving benefits as early as age 62, the full retirement age for most Americans is age 67. However, if you wait to start your benefits even longer, until the age of 70, the amount of your payment will increase by 8% per year from age 67 to 70. For top earners who maximized their income while working, the highest available retirement benefit from social security in 2022 is $ 4,194.
Every year, social security payments are subject to an inflation adjustment known as the “cost of living adjustment” or COLA. As inflation has generally been tame over the last few decades, social security beneficiaries have only received COLAs of a few percentage points or even less. However, with an increase in inflation in 2021, recipients in 2022 will see a 5.9% bump in their social security payments. This is the highest COLA in 40 years.
The majority of social security funding comes from payroll tax on existing workers. However, high-wage earners do not have to pay tax on their entire income. Each year, the Social Security Administration releases its “wage base,” which is the amount of income that is taxable for social security purposes. For 2022, this amount is $ 147,000. Like COLA for social security payments, the wage base figure is subject to annual revision based on the inflation rate. For 2022, the wage base increased significantly from 2021’s $ 142,800.
In most states, social security is not considered taxable income. However, 12 states levy income tax on social security benefits. Here are the 12 states that levy some form of social security tax:
Note that most states do not tax all social security income. For example, Kansas levies a tax of 3.1% to 5.7% on all income, but it exempts Social Security income for residents with an AGI of up to $ 75,000. Most other states have similar types of exceptions.
According to the Social Security Administration, by 2021, an average of 65 million Americans received a monthly benefit. With a current population of about 332 million, this means that nearly 20% of all Americans receive monthly benefits from the Social Security program. This number is only expected to grow as Americans live longer, which is part of the reason why the Social Security program may face difficulties as early as 2034.
> 1 trillion dollars
While the large number of Americans receiving social security benefits is impressive, it is difficult to see how much money is paid to these recipients. Figures from the Social Security Administration show that over $ 1 trillion in benefits were paid out in 2021. This alone is another number that will increase as the number of retirees grows. According to the SSA, a 65-year-old in 1940 had a life expectancy of only 14 years; in 2021, that number was 20 years. As longer life equals higher total payments, social security will have to rectify its funding problem if it wants to avoid future cuts in benefits.
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