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Getting Started With Social Security
I. History
1. Industrial revolution.
2. Urbanization of America.
3. The disappearance of extended family.
4. Increase in life expectancy.
From 1929 to 1933.
The total Wealth of our nations was cut in half in those first years.
It took over 25 years to recover.
Many pension schemes happened in the early 1930’s.
President Roosevelt on June 8, 1934.
August 14, 1935.
Life expectancy was 65 years old in the early 1930’s.
40 workers paying into the systems for every 1 retiree vs three to four workers of Today (due to decrease in Baby Boomers and retiring).
Adding dependent benefits for the spouse and minor children of a retired worker and survivor benefits to be paid to the family in the event of the premature death of a cover worker.
Transformed from a retirement program for workers into family-based economic security program.
Social Security Amendments of 1954.
- Initiated a disability insurance program which provided the public with additional coverage against insecurity.
- Social Security was amended on August 1, 1956.
- Provided benefits to disabled workers aged 50-64 and disabled adult children.
- President Eisenhower signed a law amending the disability rules to permit payment of benefits to disabled workers of any age and to their dependents in September 1960.
3. Women were granted the right to retire earlier than men at age 62.
4. Men were also granted to retire at age 62 in 1961 but at a reduced benefit.
1950.
In 1972 annual COLAs were made automatic.
The historical average for COLAs is about 2.8%.
- The schedule rates in payroll tax were increased and federal employees were added to the plan including members of Congress.
2. Gradual increase full retirement age (FRA) from 65, for those born in 1937 or earlier, to age 67, for those born in 1960 and later.
3. A portion of social security benefits could be subject to taxation.
- Omnibus Budget Reconciliation Act of 1993 increased the portion of benefits that were subject to income taxation and became effective in 1994.
II. Terms and Abbreviations
AIME – Average Indexed Monthly Earnings
COLA – Cost of Living Adjustment
FICA – Federal Insurance Contribution Act
FRA – Full Retirement Age GPO – Government Pension Offset
LE – Life Expectancy
OASDI – Old-Age, Survivors, Disability Insurance
PIA – Primary Insurance Amount
QC – Quarter of Coverage
SECA – Self-Employment Contribution Act
SSA – Social Security Administration
SSDI – Supplemental Security Disability Income
SSI – Social Security Income
WEP – Windfall Elimination Provision
III. Annual Automatic Determinations
Late October of the year.
National average wage index (NAWI) and the cost of living adjustment (COLA).
A quarter of Coverage, Maximum Family Benefit bend Points, Earning Test Exempt Amounts, the Substantial Earning Amounts, the Contribution and Benefit Base Amount, and Primary Insurance Bend Points.
IV. Full Retirement Age (FRA)
65 and 4 months.
66 and 2 months.
V. Funding Social Security
The benefits paid out today to retirees are paid by the contribution of today’s workers in payroll taxes.
6.2% each and 12.4% in combined or in total for social security or OASDI.
1.45% each for Medicare’s Hospital Insurance (HI) and 2.9 in total.
Self-employed workers pay the entire total of 15.3%.
Note: the 2.9% paid into Medicare has no income limits vs the 12.4% paid to social security or OASDI had an income limit $128,400 for 2018.
