Social Security
Social Security benefits rose by 8.7% this year. Inflation was off the charts, although the jobs report was unfalteringly glowing. But we needed that big raise – and we got it.
That’s leadership!
How many Americans – relying on salary and wages for most or all of their incomes because they haven’t retired yet – will realize a raise of 8.7% next year? If you aren’t collecting Social Security, the answer is very few; if you are, the answer is 100%.
Credit goes to our federal government on this one, doing exactly what a government is best designed for: to provide what we as individuals cannot do on our own. This year, against the headwinds of the fastest inflation in 40 years, that took the shape of a raise to match the inflation rate. It was the third largest raise in history.
That’s leadership!
However, there are still things wrong with our Social Security system that a little common sense – and leadership – could fix, but first, here are four interesting historic facts and four interesting factoids:
Historic fact #1
On August 14, 1935, President Franklin Delano Roosevelt signed Social Security into law. Today, 87 years later, 94% of our population never knew a world without Social Security. In its original form, it was meant to implement “social insurance” during the Great Depression and to fight the dangers of poverty that affected more than half the seniors in America. It provided benefits to retirees and the unemployed, and a lump-sum benefit at death.
Interesting factoid #1
The first Social Security payment went to motorman Ernest Ackerman from Cleveland, who retired one day after FDR signed the bill. Five cents were withheld from his last paycheck, and he received a lump-sum payout of 17 cents.
Historic fact #2
In 1930, life expectancy in America was 58 years for males and 62 years for females. One of the underlying actuarial assumptions of Social Security when it was enacted, apparently, was that the government wouldn’t be paying a whole lot of money to a whole lot of retirees.
Interesting factoid #2
The first regular monthly Social Security payment was issued on January 31, 1940 to Ida May Fuller of Vermont, who had paid $24.75 into the system in 1937, 1938, and 1939. Her first check, at sixty-five years and a half, was for $22.54, and with her second check she already had received more than she had contributed. She wound up living to 100 – incredibly rare for someone born in 1874 – and collected a total of $22,888.92, a payback of $925 on the dollar. (Forgive my frivolity, but with that type of return on what I’ve paid in, I think I’d be sitting on something like $4 billion. Could be more.
Historic fact #3
In 1930, only 50% of men and 60% of women were expected to live to 65.
Interesting factoid #3
The average remaining life expectancy for those who reached their 65th birthdays in 1930 was 12 years for men and 14 years for women, so it’s safe to assume that nobody at that time entertained the thought that Social Security wouldn’t be able to provide the “social insurance” it was intended to provide. Nice thought.
Historic fact #4
The entire civilian labor force in 1933 (when FDR took office) was 51.8 million. In 2021 it was 162 million.
Interesting factoid #4
There are more people collecting Social Security benefits today – 61 million – than there were in the entire labor force 80 years ago.
Social Security, you see, was a neat little system, and retiring Americans weren’t expected to burden it. In cold language, most Americans weren’t expected to live long enough to collect anything at all, and those who did…not very much.
What a different story today – and it would be a huge mistake to cut back on it, as some politicians are suggesting, for a multitude of reasons.
For starters, nearly 80% of Americans are opposed to cutbacks, including many who have not yet begun collecting.
Second, our population is aging, due to better health and longer lifespans. In other words, there will be more Ida Mae Fullers. Unless Social Security keeps up with that, this increasing elderly population will become a burden.
And third (at least for now), the greatest flaw in Social Security is capping the amount of income that is taxed. If you earn the cap of $142,800, and 6.2% is deducted, then your contribution is $8,853.60. That’s still your contribution if you earn a million or a billion, at which point your contribution is relatively nothing. Fair? In fact, two pitchers on the New York Mets staff this year – Max Scherzer and Justin Verlander – each earning $43,000,000, made – based on number of starts and pitch count, $14,333.33 – per pitch!!!
They finished paying their Social Security contributions before their first pitch of the season reached the catcher’s mitt. (For transparency, I’ve been a Mets fan since they came into being in 1962, and kinda like having those two guys on my team.)
But fair, it’s not: 6.2% of their full salaries would be $2.67 million. Apply that across the board, and we might be able to lower the rate on lower incomes while raising benefits for those who really need Social Security. And so on.
That sounds fair.
Accountants won’t solve this. Actuaries won’t solve this. Politicians won’t solve this.
Leaders will. That’s leadership!
