Tag Archives: retirement
Are you relying on Social Security for your retirement? Don’t! You need to read these 25 Facts about Social Security!
On August 14, 1935, President Franklin Delano Roosevelt signed the Social Security Act that made the Social Security program law. At that time, the program was founded because so many Americans had just lost all of their assets and savings in the Great Depression, leaving them nothing for retirement.
More than 80 years later, 165 million American workers are currently covered under Social Security, including 46.6 million seniors age 65 or older. In fact, Social Security has been one of the single most significant, ambitious, and helpful government programs in the history of the world.
However, that program may not withstand a seismic shift in demographics in this country, due to a swell of Baby Boomers leaving the workforce as they retire, drawing their Social Security benefits out of the program instead of contributing.
Will Social Security be around in its present form when you retire? Are you counting on SS benefits for a significant portion of your retirement? Or, does the modern American need to more carefully manage their own financial house – including keeping a great credit score, paying off debt, and saving and investing, to ensure their future?
Here are 25 facts about Social Security so you can be the judge:
1. About 60 million Americans currently receive Social Security benefits, adding up to $863 billion of payouts. To put it in perspective, that amount is the largest item on our federal budget and accounts for about a quarter of all spending.
2. Within the next two decades, the number of SS beneficiaries should grow to 90 million.
3. Compare the huge number of Social Security retirees today to the program’s first year of benefit payouts, 1940, when only 220,000 Americans were signed up.
4. In fact, Social Security’s first beneficiary was a woman named Ida May Fuller from Ludlow, Vermont, who received monthly payments of $22.54 a month for 35 years.
5. FDR’s original Social Security program only paid benefits to retired workers. But later on, the program was expanded to offer disability benefits and payments for a beneficiary’s spouse and children for widows and widowers.
6. The average monthly payment for SS benefits now is $1,221, or $14,700 a year.
7. Since Social Security first collected tax contributions in 1937, it’s collected more than $13 trillion in income and paid our $10.6 trillion, as of 2007.
8. That amount of money that flows in and out of Social Security is so enormous that each year, it manages more money than the economies of all but the 16 richest countries in the world!
9. Each day, 182,000 people visit Social Security offices, and 445,000 people call the Social Security Administration. Just last year, there were also 17 million applications to replace lost, damaged, or stolen original Social Security cards!
10. 2010 was the first year that Social Security disbursements outpaced its income, if you don’t count interest on trust-fund assets. Even factoring in that interest, disbursements should outpace income by 2021, and that interest is expected to be completely exhausted by 2033.
11. Only 8% of American workers are very confident and only 24% somewhat confident that Social Security will continue to provide benefits of at least equal value to today’s retirees and recipients.
12. 33% of today’s workers say that Social Security will be a major source of income when they retire, compared to 46% who say it will only be a minor source of income and 20% who say they won’t count on it for income at all.
13. Today, the average retiree gets 12 more years of Social Security benefits than a person did in 1940 due to the fact that we’re living longer AND retiring earlier (an average age of 64 instead of 68 in 1950.)
14. And while Social Security is still the largest source of income for Americans over 65, only one in three people depend on it to cover 90 percent.
15. Thanks to the increase in elder Americans (Baby Boomers), the Recession’s impact on stagnating wages, and a larger population receiving benefits, there are less than three workers paying into Social Security for every one retiree eligible for a payout.
16. That’s a sharp drop from 2009, when there were three workers per retiree, and 1960, when five workers were paying into the system for every one person collecting a check.
17. In fact, 75 million Americans are on the cusp of retirement and being eligible for Social Security payouts, as each day, 10,000 more people turn 65 and the oldest of the Baby Boomers generation turn 68 this year.
18. Each American citizen is assigned a Social Security number, shortly after birth since 1989. But many people don’t realize that those 9-digit combinations are not random. In fact, the first three digits are based on the geographic region you were born in, with lower numbers in the Northeast and higher numbers in the West. The middle two numbers are called the group number, and issued in nonconsecutive order between 01 and 99. Meanwhile, the last four digits are issued sequentially. So far, there have been 420 million unique Social Security numbers that aren’t being reused after the person’s death.
19. To save money, Social Security is phasing out paper checks. It actually costs them $1 to mail out each paper check, while electronic deposits and transfers only cost 1/10th of that. Does it sound like small change? In fact, going paperless is expected to save taxpayers $300 million over the next five years!
20. The Social Security Administration is in dire straights, both financially and operationally. In fact, over the past three years, the SSA has lost 11,000 employees, about 12% of its workforce, and by 2022, about 60% of its supervisors will be able to retire. Additional budget cuts have forced 44 field offices to consolidate, 503 mobile contact stations to close, and eight new hearing offices to be suspended. Even call centers are under siege, with average wait times when someone calls in now over 10 minutes, when it used to be only 5 minutes as recently as 2012.
21. The struggles of Social Security have been so well documented that we could easily write another book about its impending financial hardship. Basically, by 2016, the trust fund that supports Social Security’s disability payments is expected to be empty. If (when) that happens, the 11 million people who now receive Social Security disability payments will see an automatic 19 percent cut in benefits.
22. The math gets even scarier when you consider that over the next 75 years, Social Security is projected to pay out $159 trillion MORE in benefits than it collects in taxes.
23. If we adjusted that number for future inflation, that means our Social Security program will be underfunded by about $35.3 trillion in 2015 dollars. Just how big of a gap is that? $35.3 trillion is TWICE the entire national debt!
24. It’s not a complete doom and gloom scenario, as Congress is already floating some ideas to remedy this shortfall and get Social Security back on track. However, solutions include increasing SS taxes, cutting benefits, and pushing back the retirement age – none of which are very popular with the American people.
25. But even with a payroll tax increase of 1.3 percent, benefits cut of 16.2 percent, or any combination thereof, would right the projected Social Security deficit and allow the program to remain solvent for about another 80 years – in time for another birthday celebration.
As our society grows older, the financial burden looms.
While there are plenty to choose from, unfortunately, the impact of an aging population may be the most significant challenge we face. From healthcare to retirement, social services to housing, as the average life expectancy grows and the roles and needs of our seniors change, this massive demographic shift is already causing cracks in the faultline of our economy.
But it was only a decade or two ago that the thought of seniors needing to carefully manage their credit scores, credit card debt, and student loans was virtually unheard of.
In this ongoing series, Nationwide Credit Clearing will dissect some of the facts, stats, and financial trends among seniors in the U.S. Aside from offering this education, we really want to help, so any senior can contact us for a completely free consultation and credit report.
10 Facts, stats, and trends in senior finances:
1. Between 2007 and 2016, the percentage of senior households (with members 75 and over) grew from 31.2% all the way to 49.8% – or nearly half.
2. The amount of debt is also skyrocketing in the average older households, from $30,288 in 2010 to $36,757 in 2016. In fact, among older households with debt, the median total has risen more than 2.5 times since 2001!
3. Likewise, in 1992, only 41.5% of senior households had any debt, but that number has now risen to 60%.
4. More than 40% of single adults also count on their monthly social security check for 90% of their living expenses and income. The amount of that check? Only $1,404, on average.
5. Medical debt is one of the fastest growing financial burdens. Consider that 84% of people 65 years or older face at least one chronic condition. But insurance is covering less and less of the cost for their care, so in the five years leading up to their death, the average senior racks up $38,00 in medical (or medical-related) debt, and 1 in 4 approach bankruptcy.
6. Even credit card debt is on the rise among seniors. In 2001, just less than a quarter (24.2%) of seniors had any credit card debt at all. Now, more than 1 in 3 (34.2%) carry balances on their credit cards that aren’t paid off monthly. In fact, seniors hold 50% ore credit card debt than members of Gen Y!
7. You may be shocked to hear that the fastest form debt among seniors is student loan debt! It’s true, as these days, 2.2 million Americans 60 or older are responsible for student loans. However, it’s not that these industrious seniors are going back to school. Instead, they’re cosigning for their children or grandchildren at rates that have tripled since 2005. And with minimum student loan payments averaging $700 a month and the younger generation having a harder time making ends meet or defaulting more and more, these seniors are assuming the financial burden.
8. The financial picture for more and more seniors is bleak. In fact, one-third of all senior households either is going into debt every month to pay basic living expenses, or just breaking even.
9. Even more distressing, 25 million Americans ages 60 and up are considered economically insecure – which is living at or below 250% of the federal poverty level (that comes to about $29,425 for a single person.)
10. If we look at the data on credit scores, we see that seniors have the highest credit scores of any generation. In fact, the average FICO for all consumers 70 and over is 747, while 60-69 year-olds have an average FICO of 722 (and it goes down to about 640 for those 18-29.)
However, that doesn’t tell the whole story, as seniors are now defaulting on their financial obligations and debts at an unprecedented rate. Facing massive healthcare costs and medical bills, rising credit card and student loan debt obligations, and a shortfall from social security and retirement planning, seniors are now in need of some credit score help like the rest of us.
Look for part two in this series about the financial burden that comes with aging. And remember that we really do want to help, so any senior can contact us for a completely free consultation and credit report.