There are lots of interesting and sometimes surprising facts about Social Security. It's worth knowing many of them -- you can be the life of the party, regaling others with retirement stats at social gatherings. And the more you know about Social Security, the better the decisions you can make about it -- and the more money you can get out of the program.
Here are 30 fascinating and/or impressive statistics related to Social Security -- some of which can lead you to greater financial security and more retirement income.
Image source: Getty Images.
1. $1 trillion
That's how much Social Security pays about 63 million Americans in benefits annually.
Some might worry about fraud or simple mistakes resulting in improper payments. They do exist, but they're relatively minor -- reportedly amounting to $3.1 billion in 2015, which is just 0.36% of all payments. And in 2009, President Obama called for that number to be reduced.
3. $2.8 trillion
While many worry about the health of Social Security, and the program does face challenges, it's not about to go broke anytime soon. As of 2016, the Social Security Trust Fund reserves held $2.8 trillion -- and millions of workers continue paying into the system regularly.
The $1 trillion that Social Security pays out annually makes up a hefty 5% of our country's entire gross domestic product, which was about $19 trillion in 2017.
5. 173 million
That's how many people are covered under Social Security -- more than the entire population of Russia, Mexico, or Japan. (The U.S. population was recently around 327 million.)
Close to 90% of people 65 or older collect Social Security benefits.
Image source: Getty Images.
One-third of the income of elderly Americans is provided by Social Security benefits.
According to the Social Security Administration, 23% of married elderly Social Security beneficiaries and 43% of unmarried ones get fully 90% or more of their income from the program.
About half of married elderly beneficiaries and 71% of unmarried ones get 50% or more of their income from Social Security.
Not surprisingly, two-thirds of those responding to an AARP survey said that Social Security was one of the "very most important" government programs.
11. 22 million
According to a report from the Center on Budget and Policy Priorities, without Social Security income, 22 million Americans would be poor. That's meaningful, considering how low the official poverty line is. For 2018, the federal poverty level was $12,140 in annual income for individuals and $16,460 for a family of two.
The normal (or "full") retirement age for Social Security -- the age at which you're eligible to start collecting your full benefits -- used to be 65, but it has been increased for many of us. For those born in 1937 or earlier, it remains 65; for those born in 1960 or later, it's 67; and for those born from 1938 to 1959, it's somewhere in between. Some lawmakers have proposed increasing the full retirement age (FRA) to 69 in order to reduce benefit costs and make it easier for Social Security to sustain itself financially. Here's how to find your FRA:
Full Retirement Age
1937 or earlier
65 and 2 months
65 and 4 months
65 and 6 months
65 and 8 months
65 and 10 months
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 and later
Source: Social Security Administration.
No matter what your FRA is, though, you can choose to start collecting your benefits as early as age 62.
You can also delay starting to collect your benefits beyond FRA -- until age 70, if you want.
You may think of Social Security as solely a retirement program, but only about 72% of the benefits it pays out are retirement benefits. Another 16% goes to disabled workers and their dependents, and 13% goes for survivor benefits.
In order to qualify for Social Security benefits based on your earnings, you need to collect 40 credits. A credit represents earnings of at least $1,320 (as of 2018) within a year, with up to four credits per year. Thus, most of us can qualify by working for a decade and by earning at least $1,320 per quarter (that amounts to $5,280 for the year) as of 2018.
Meanwhile, the formula that the Social Security Administration uses to calculate your benefits is based on your earnings in the 35 years in which you earned the most money (adjusted for inflation). So for maximum benefits, aim to work a full 35 years. If you earned income for only 30 years, the formula will incorporate five zero-earning years, which will shrink your benefits.
Image source: Getty Images.
Social Security retirement benefits are designed to replace about 40% of your pre-retirement income, if you earned an average income. That percentage is higher for lower-income folks and lower for higher earners. So don't expect it to mostly replace your current income. Note, too, that while 40% is more than some countries offer, it's a significantly smaller portion of earnings than many other countries offer via their retirement programs. Spain and the Netherlands, for example, offer more than 80%; France, Italy, Sweden, and Finland, among many others, offer more than 50%.
The average monthly retirement benefit was recently $1,408 -- or $16,896 per year. If your earnings have been above average, you'll collect more than that.
That was the overall maximum monthly Social Security benefit recently for those retiring at FRA -- about $33,500 annually.
You can collect even more than that if you earned the maximum wages on which the government collects Social Security payroll taxes and if you started collecting at age 70. In that case, the most recent maximum monthly benefit was $3,698, or $44,376 for the year.
By starting to collect earlier or later, you can make your ultimate retirement benefit check smaller or bigger than what you'd get if you started collecting at FRA. For every year beyond FRA that you delay starting to receive benefits, you'll increase their value by about 8% -- until age 70. So delaying from age 67 to 70 can leave you with checks about 24% fatter.
That works in reverse if you start collecting early. For every year before FRA that you start collecting, your benefits shrink by about 7%. So if your FRA is 67 and you start collecting benefits at age 62, your checks will be about 30% smaller.
The stats above might have you thinking it's a no-brainer to delay collecting until age 70 if possible, but it's not. The system is designed so that total benefits received are about the same no matter when you start collecting, if you have an typical life span. Checks that start arriving at age 62 will be considerably smaller, but you'll receive many more of them. (Of course, if many of your ancestors have lived into their 90s, delaying can be worthwhile.)
Image source: Getty Images.
25. 12 months
A little-known fact about Social Security is that it offers a do-over. You have a year from whenever you start collecting your benefits to change your mind -- which could happen, for example, if you land a great job soon after retiring. You can essentially undo filing for benefits by submitting Form SSA-521 -- but you'll have to repay all the benefits you've received.
Employee income is taxed at 6.2% for Social Security. That figure may seem familiar from your pay stubs. What you may not appreciate, though, is that employers cough up a corresponding 6.2%. That's not news to self-employed people, unfortunately, as they have to pay both the employer and employee portions -- a whopping 12.4% of earnings. (The combined rate when Social Security was created was just 2%!)
Social Security benefits are generally not taxed. But if your income passes a certain level while you're receiving Social Security benefits, those benefits may end up taxed. No more than 85% of your benefits will ever be taxed, though.
Someone earning $128,400 in 2018 and someone earning $5 million will pay the same Social Security tax. That's because the amount of our earnings that are taxed for Social Security is capped -- at $128,400 for 2018. Any earnings above that do not get taxed for Social Security. (Many view this as unfair, and one proposed way to bolster the Social Security trust fund is to eliminate this cap, or at least increase it substantially.)
The ratio of contributing workers to beneficiaries has been plunging over time. Back in 1950, the ratio was 16.5 to 1, with about 48 million workers supporting close to 3 million beneficiaries. The ratio was recently just 2.8 to 1 -- and it's expected to hit 2.2 by 2035. This is making the program in its current configuration no longer self-sustaining over the long run. Thus, many ways to cut benefits or increase income to the program are being proposed.
Social Security also offers survivor benefits for family members of eligible workers who die. The Center on Budget and Policy Priorities notes that, "For a young worker with average earnings, a spouse, and two children, that's equivalent to a life insurance policy with a face value of over $674,000 in 2016, according to Social Security's actuaries."
Life can throw wrenches into our retirement plans, but it's good to know that we can look forward to Social Security income. Keep learning about it, because the more you know, the more money you'll likely be able to receive from the program. And if politicians propose changes you don't like, let them know.
More From The Motley Fool
- Here's How to Get the Maximum Social Security Benefit
- The $16,122 Social Security Bonus You Can’t Afford to Miss
- Is Social Security Taxable?
The Motley Fool has a disclosure policy.