Why is Social Security so important?
Social Security works for all Americans, and it has never been more important to our economic security:
- Sixty-one million depend on Social Security – more than 1 out of every 6 Americans.
- Just over 3 in 5 seniors depend on Social Security for most of their income.
- One-third of seniors rely on it for at virtually all (90% or more) of their income.
- Social Security’s benefits are modest, but vital, averaging around $15,000 per year.
- Social Security lifts 22.1 million Americans out of poverty. Without it, the poverty rate of our seniors would be nearly 41%; instead it is just under 9%.
- It is an extremely efficient program, with administrative costs of less than a penny on the dollar.
Is Social Security just for seniors?
Not at all. Social Security is the nation’s largest and most generous program for disabled workers, providing 8.9 million with benefits. It is also the nation’s largest and most generous children’s program, serving 4.3 million children. In fact, about one in three Social Security beneficiaries are receiving disability or survivor benefits.
Social Security is by far the nation’s most important life insurance policy, providing benefits to older persons (i.e., widow and widowers) whose spouse has died, to many younger spouses caring for dependent children, and to children whose parent has died. Social Security’s protections are estimated to have a present value of $612,000 in life insurance and $631,000 in disability insurance for a married worker who has average earnings and two children under 5 years old.
Why are Social Security’s protections irreplaceable?
The best part about Social Security benefits is that, in contrast to savings in a 401(k) or IRA, they never run out (until surviving children become adults). Furthermore, in contrast to a pension, they are fully portable between jobs. And in contrast to both 401(k)s/IRAs and the vast majority of pensions, benefits are protected from erosion by inflation, through the COLA.
How important is Social Security for retirement?
For most Americans,Social Security is essential for retirement. Just over 3 in 5 seniors rely on Social Security benefits for most of their income. And Social Security’s importance is increasing. Americans have traditionally relied on the “three-legged stool” – Social Security, employer pensions, and personal savings (including home equity) – to have sufficient income for retirement. But employer pension plans are disappearing, most Americans have been unable to accumulate meaningful savings in 401(k)s/IRAs, and homeownership rates and housing values have declined. For many, Social Security is the only stable leg of the “three-legged stool.”
How is Social Security funded?
Isn’t Social Security the cause of our large federal deficit?
Not at all. Social Security has its own dedicated revenue stream described above, so it cannot contribute a penny to the federal deficit. In fact, it currently enjoys a $2.8 trillion surplus that will grow to $2.9 trillion by 2019. And Social Security is forbidden by law from borrowing, so it cannot deficit spend.
Where does Social Security’s surplus go?
Isn’t the trust fund just a bunch of IOUs?
Is Social Security going bankrupt?
What’s the best way to solve Social Security’s long-range funding gap?
Why shouldn’t the retirement age be raised?
Should rich people continue to collect Social Security, or should it be “means-tested”?
In short, it makes far more sense to leave intact the current system’s fair and intelligent design, whereby everyone pays in, and everyone receives their earned benefits. A more detailed fact sheet is available here.