Government programs fail more times than they succeed and, with every presidency, there is a succession of programs that never got off the ground or didn’t quite work as proponents expected. Social Security is definitely not in this category. In fact, since its launch in 1935, it has been one of the most successful government programs in history. As of 2020, over 64 million Americans rely on it.
Despite its age and its wide-spread use, there are many things that people don’t understand about social security and there are many misunderstandings concerning its use. It’s those issues that we will address in this guide as we look at 7 facts about Social Security and seniors.
Low Earners Get a Greater Share
The more you earn, the more Social Security you will pay through your payroll taxes, and the greater your Social Security benefits will be as a result. However, individuals with high wages generally earn a much smaller share than those with low wages.
A retired worker who earned around 50% less than the average wage can expect to receive half of their prior earnings, while a worker who earned 150% more than the average wage can expect around a quarter.
Of course, those with a history of higher earnings will still receive a larger dollar amount, it will just be matched at a smaller percentage of their previous earnings.
They Are Adjusted for Inflation
Social Security benefits always adjust for inflation, ensuring they keep pace with the rising cost of living. They are one of the few retirement benefits that do this and, therefore, provide workers with a much-needed guarantee as they approach retirement age.
We’re talking about a long period of time and a lot of money. As such, it’s important for any long-term investments to grow at least in accordance with inflation, whether you have shares that collect dividends or you have a substantial retirement fund.
They are Not Enough to Live Comfortably
The idea that Social Security benefits provide someone with the means to live comfortably and without concern is a complete fallacy.
At around $1,500 a month, they are actually much less than the average person realizes. Furthermore, once you deduct Medicare Part B premiums, this figure falls by at least another couple hundred dollars.
Healthcare costs are also increasing at a much greater pace than these benefits and, as a result, many retirees are left out of pocket every month. The cost of even the most basic dental care can range from $200 to $2,000 per treatment, while homecare services, assisted living facilities, and senior care communities can cost anywhere from $1,000 to $5,000 a month.
You could argue that $1,500 per month is still a lot of money to live on, but the average senior has a number of expenses and these ensure they have very little money left over at the end of the month.
Seniors should look into other retirement funds to ensure they have the means to live comfortably after they retire.
Life insurance is also key. Not only will it provide some financial support to family members after you pass, but it can also be used as an alternative investment. The earlier that life insurance is purchased, the cheaper it will be.
They are Poor by International Standards
When you compare Social Security benefits with benefits offered in other countries, they look very poor indeed. The average payout in the United States is 40% of the worker’s previous earnings. This is on par with a few other developed nations, including the United Kingdom, Japan, Germany, and Belgium, but it’s barely enough for the US to scrape into a list of the top 40 countries.
Netherlands, Israel, Denmark, Australia, Iceland, Spain, Italy, Greece, Hungary, Australia, and the Czech Republic all put the US to shame, offering over 100%, and they’re not alone. The average is closer to 60%, and this is just for developed nations.
Social Security Helps Millions of Seniors out of Poverty
If you take Social Security benefits out of the equation, approximately 40% of Americans would dip below the poverty line. These benefits are said to help over 15 million citizens stay above this line and continue to live comfortably.
Over the last few years, seniors have become more reliant on Social Security benefits. The cost of living has increased, healthcare costs have spiraled, and this, coupled with the chaos caused by the Coronavirus pandemic, has caused countless issues for millions of elderly Americans.
Social Security is Especially Important for Women and People of Color
Research suggests that Social Security benefits have more of a positive impact on the lives of women and people of color. Unfortunately, while the world has come a long way over the last few decades, women are still paid less than men on average. This means they’re often much closer to the poverty line.
African Americans and Latinos are also less likely to be entered into workplace retirement plans and more likely to work low-pay jobs. In addition, they have higher disability rates that result from higher poverty levels, as income has more of an impact on health and quality of life than anything else. Therefore, they are more likely to benefit from Social Security.
Social Security Benefactors are Increasing
It’s estimated that close to 60 million Americans are over the age of 65 right now, and this number is expected to go up to around 80 million in the next 15 years. That’s not a bad thing, though.
The US population is healthier and has access to better healthcare than ever before. In the last 80 years, the average life expectancy for a 65-year-old has increased from around 14 years to over 20 years.
Furthermore, fewer people are dying before they reach this age. In fact, just 1 in every 9 twenty-year-olds will die before they hit 67. This means that more Americans will be reliant on Social Security benefits in the years and decades to come.