BASIC DUAL NATURE OF SOCIAL SECURITY

Most people probably think of Social Security as a retirement system, which it is in part.  But at the same time it is also a welfare system, which explains why the retirement part is so minimal as compared to actuarially based pension systems.  That is, the welfare aspect costs money, to the detriment of the retirement aspect. 

My aim is to flesh out the details of this a bit.  My source of data is the official website of the Social Security Administration: www.socialsecurity.gov. 

ELEMENTS OF THE WELFARE ASPECT

1. SSI (Supplemental Security Income) and Disability

SSI payments, either separately or in combination with regular Social Security benefits, go to people who have "low income and few resources" (as carefully defined, of course), and who are 65 and older or who are blind or disabled.  In November, 2009, 12,675,000 "disabled" people were on Soc. Sec. and/or SSI, including children with their own disabilities. 

2. Spousal Benefits

Even if a spouse has never worked under Soc. Sec., he or she at full retirement age can collect one-half of the full retirement amount of the working spouse if that spouse is already drawing a benefit.  (Amount reduced if spouse is collecting a substantial non-Social Security pension.)

3. Survivors

A deceased worker's unmarried children under age 18 receive benefits, as does the widow or widower.  (Full benefits at age 66, reduced benefits at 60, or benefits at age 50 if disabled). 

4. Children

Even if not survivors of a deceased worker, as above, unmarried children under age 18 of Soc. Sec. retirees receive benefits. 

ELEMENTS OF THE RETIREMENT ASPECT

Even the computation of the basic Soc. Sec. retirement benefit has a "welfare" aspect: Low wage earners get a higher percentage of their earnings as benefits than do high wage earners.  For a worker who turns 62 in 2010, the first $761 of average monthly wages is multiplied by 90%; the next $4,586 by 32%; and the remainder by 15%.  Thus, the maximum Soc. Sec. benefit at age 66 in 2010 is $2,346.  This is based on the maximum taxable amount of wages for every year after age 21.  This is pretty paltry!  And the average monthly Soc. Sec. benefit is $1,164 at the beginning of 2010.  Again, not much! 

CONCLUSION

While Social Security was not intended to be a sole adequate source of income in retirement, and while seniors living on Soc. Sec. alone are probably guilty of poor planning, the fact remains that there are a lot of them and that they have a VERY difficult time just getting by.  Whether we think the dual retirement/welfare nature of Soc. Sec. is good, bad, or indifferent, it remains something not usually fully appreciated. 

Meta: 

Comments

what is your point?

Are you trying to claim that somehow welfare is "bad"? That poor people shouldn't get any money? Or somehow that social security is screwed up?

Pulling a bunch of facts we all pretty much all already know from the social security website doesn't tell us much and assuredly if you're trying to claim somehow social security is "bad" because those poor people get more money than rich people.....I don't think you're going to be too popular here.

Poor planning? How about no friggin' money to plan with?

You must have Javascript enabled to use this form.

Replay to Robert Oak

I am surprised at the inferences you draw from my post. I do not think that Social Security is bad or screwed up, and I pointed out my sympathy for those struggling on Soc. Sec. alone. I was trying to point out the nature of the entire program, which was unknown to me until recently. If everybody was already aware of this, then I am guilty of wasting everybody's time and I apologize. But your degree of hostility is a surprise to me. Peace, brother!

You must have Javascript enabled to use this form.

Ray Joiner

Is this your first post?

Because it does read like you're one of those conservatives who blast all social safety nets, social security as just a bunch of welfare bums...

If that's not your point and you did not know this information, then you're probably right and others do not know this information.

Myself, I get social security reports and almost immediately throw them in the trash it's so low. But I am self-employed, so I believe it's much worse for the self-employed.

You must have Javascript enabled to use this form.

Ray

Social Security was seen as part of the three legged stool for retirement savings: 1) pensions 2) personal savings 3) social security. Over time pensions were replaced with 401Ks and other retirement scams.

I agree that there is a certain "welfare" quality to social security but that is not necessarily because current retirees were wrong in not saving instead they are out living their savings or even pensions converted to 401ks or entirely eliminated.

Social security needs some adjustments but most of all it needs to be preserved. Turning it over to Wall Street would be a monumental mistake.

I am afraid our entire retirement savings system is in trouble.

RebelCapitalist.com - Financial Information for the Rest of Us.

You must have Javascript enabled to use this form.

Clarification to Social Security blog

Thanks to Andrei Vyshinsky's post pointing to this excellent article by Prof. Hudson:

Spending a year hoping to get Republicans to sign onto health care almost seems to have been a tactic to give Mr. Obama a plausible excuse for stalling rather than to address what most voters are mainly concerned about: the economy. Subsidizing the debt overhead and the debt deflation that is shrinking markets and causing unemployment, home foreclosures and a capital flight out of the dollar has cost $13 trillion in just over a year – more than ten times the anticipated shortfall of any public health insurance reform or an entire decade of the anticipated Social Security shortfall.

That shortfall he mentions is similar to my mention of it in Full Spectrum Inequality from David Cay Jonston's books, Perfectly Legal: 1984 to 2002 Social Security took in $1.7 trillion more than was paid out.

That clarifies things a bit.

And, with regard to:

..and while seniors living on Soc. Sec. alone are probably guilty of poor planning..

Do you have any possible idea of the number of multiple layoffs American workers have been exposed to over the years, which have grossly robbed them of their retirement savings? Or the pension funds which have been "legally" destroyed and nullified by shysterly behavior of corporations and courts? Remember Cheney's purchase of that bankrupted company, which due to said bankruptcy, could forego their pension fund obligations?

You must have Javascript enabled to use this form.

after I wrote my original comment

lest we never forget...we have Americans who cannot figure out that in McDonalds, "2 to $3.50" when 1 costs $1.50" means you really should buy that item one at a time.

They will and do buy 2 thinking that's the better deal. You cannot go into any major corporate retailer and not find hundreds of examples just like the above.

So, even though SS prints out reports for everyone in the U.S., the website is about the easiest thing to read....

believe this or not, when some idiot or "personal finance" idiot goes on cable, blaming Americans for not having any retirement....

most people cannot add that $10/hr with no job for 27 months equals zero retirement savings. They cannot get that "laid off from $125k/yr job, no job for 2 years, new job @ $34k/yr means.....due to their planning and probably housing costs alone to maintain the $125k job"....they probably just took the penalty and burned through whatever was left of a 401k just to survive.

Seriously, basic math skills are so lacking in the U.S. I notice and even when everyone can literally carry a very small calculator around if they cannot calculate out these numbers in their head ....it's like most people just simply cannot figure this basic math out.

It's like they have no concept here or cannot get quantities, scale as concepts burned into the synaptic junction brains....

hence, they are extremely vulnerable to daily ripoffs, bogus rhetoric with no statistic backing and snow jobs.

What am I saying here? Well it's almost like we have a teaching problem. How do we communicate to general folk that they must get the concept of scale and size in their brains when it comes to anything with a number in it?

I mean I'm not here to educate the uneducated, the point of this site is a lot of self-education....but on the other hand, when some concepts are hard to grasp I do try to use images to show scale....

just thinking out loud on how do you get the American people to use their friggin' calculators and understand basic addition and subtraction and multiplication to realize specifically how they are being had?

You must have Javascript enabled to use this form.

Pie in the sky, I'm afraid

When I was younger I recall that California used to lead the nation in higher education, until Reagan became the gov and trashed that (shame on you Californians: Nixon, Reagan and now what's-his-face).

I recall meeting guys with engineering degrees from what were once considered decent Cal. colleges, received in the '80s on, who had only taken up to calculus -- basically the same calculus I had in high school.

No multivariate calc....no linear algebra!

Now the standard template is for politicians running for office to claim we need better and improved education.

Sure, but for what? All the education goes for naught unless there's industry and jobs to utilize it.

Which is why, with all this talk of the US finally getting a bullet train (been hearing that for the last 30 years -- been trying to get it for the last 30 years) I have to laugh and ask them if they believe in the Tooth Fairy.

The media and powers-that-be have manufactured an aura that education is rather silly and time-wasting, and the HR industry has certainly promoted it as well.

When the fewmets hit the fan, the more knowledge, the better....

You must have Javascript enabled to use this form.

Social Security

is a subsidy to Wal Mart. That's why you see so many smilin' old folks at the door. How else can they get people to work for the minimum wage and pretend that they are making a living?
Frank T.

You must have Javascript enabled to use this form.

Frank T.

Its a Safety Net

Just like welfare was intended to be. Now its been opened up to cover so many things (like the budget deficit since Reagan) that its headed under.

Welfare meanwhile has become a way of life spawning new terms such as 'my babys daddy' and 'my babys momma'.

You must have Javascript enabled to use this form.

Huh? Another neocon talking meme, definitely an example....

of a consumer response, not a citizen's response.

As one who has always striven to be a citizen, not the majority in America today, consumers, I try to understand what's going on.

Where in creation did you get the idea Soc.Sec. is going under?

Now, Medicare has been continuously underfunded, but Social Security has always been in surplus mode.

And that trifling unemployment, at the "official" 10%, should have negligible effect on Social Security taxation.

Assuming, of course, that figure is accurate.....

You must have Javascript enabled to use this form.

Social Security was never

Social Security was never meant to be a retirement program. It is INSURANCE, in case you need it if you should be disabled, widowed with children, reach old age and do not have enough to live on. It worries me that so many people are relying on social security to live on. Even if you are 50 you can still sock away money for the next 20 years to help with retirement.

...“A democracy is always temporary in nature: it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority will always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is) always followed by a dictatorship.”

You must have Javascript enabled to use this form.

Idiocy abounds

It worries me that so many people are relying on social security to live on. Even if you are 50 you can still sock away money for the next 20 years to help with retirement.

How very droll, consumer person. Quoting a clown from the National Association of Manufacturers, whose very first president, and one of the original founders, was none other than George W. Bush's great-grandfather (evidently those NAM prezes don't breed too well, just spawn like degenerates).

Now how does someone who has been consistently laid off, while their jobs have been consistently offshored, and can't find any work due to the (illegal, but congress and presidentially-sanctioned) importation of scab workers, and has their savings eroded by attempting to survive amidst all this illegality, supposed to be saving money?

Perhaps by jacking all those Hummer drivers? Now there's a good start to buttress your leap into nonsense.

And presently, since numerous studies (you can find them by perusing the content of this site for the past year) have shown and proven that zero jobs have been created by the private sector over the preceding 10 years in America.

Can you spell douchebag? Apparently, not.

You must have Javascript enabled to use this form.

Question for James Woolley

Can you explain the meaning of "consumer" and "citizen" as you have used them here? We are all consumers because we buy stuff, but that is obviously not what you mean. From the context, I assume you mean "citizen" as a person who cares about the good of society as a whole. Is this anywhere close? Note that I am not disagreeing with anything, but I am just curious because I am not familiar with the use of these two terms as opposites to each other, which is (I think) the way you are using them. Maybe my confusion is because I am new to this site.

You must have Javascript enabled to use this form.

Ray Joiner

James Woolley responds to question

My usage of consumer, not uncommon today among lifelong volunteer political activist types (I didn't think up the differentiation, but I appreciate and use it now) is an American, most definitely in the 35/40 and above, age range, who has never been active in their citizenship, but militant in their ignorance.

We all begin in ignorance, but those who chose to remain and wallow in ignorance define stupidity -- they are most definitely stupid.

Ralph Nader said, over forty years ago, that if the majority, or at least a substantial number of Americans, didn't become active citizens, then one day this country would be completely stolen from us. That day has long since arrived.

When an American man in their fifties states to me that he is clueless as to why he can't find a job -- and has spent a substantial portion of his life immersed in TV and sports land and still is completely unaware of the collapse of the American banking system some time back -- he is a consumer -- most definitely not a citizen.

When an American woman in their forties, fifties or older, believes everything she heard on freakazoid Kramer's Mad Money show, remains completely unfamiliar with the voting record of her "progressive" senator (who is about as right-wing as one can get, even though said senaturd has a D following their name), she is a consumer.

If someone has reach their middle age -- doesn't know anything about the environment in which they have lived and existed for decades upon decades -- that individual is certainly no citizen.

Over the past year or so, there has been a 1,000% increase in the number of divisive programs on the media (TV, cable, radio, corp. news, etc.) which will only increase as the economy grows ever more stagnant, and worsens. This is the usual process of divide, divert and conquer. Happened before, will continue to happen while the sheeple sleep. (By divisive I mean pitting young against old, racial groupings against other racial groupings, male against female, this religion against that one, etc.)

When some clown who is 58 frigging years old, tells me (and he has just recently discovered politics) that he sends a positive note to his congress critter when he votes for something he is for, even though the legislation fails to pass, or a positive note for something his congress critter votes against, even though such legislation ends up passing; this too is a consumer.

Why? Anyone who is completely ignorant of how congress operates by their middle age -- who doesn't know of pre-vote counts, and that it only matters what they vote for which passes, or votes against, which doesn't, is a complete and utter idiot!

So to anyone in a union who doesn't understand that any stories put out there by NAM (National Association of Manufacturers -- the most anti-union and anti-worker group in existence, and for many generations so) and the US Chamber of Commerce, is certainly devoid of any citizenship qualities.

You must have Javascript enabled to use this form.

The Old Folks at Home

There is such a thing as the Social Contract. Toqueville observed it very astutely in his journals. People engage in cooperation because it serves the interests of the community. Social Security and Medicare were not simply the actions of greedy geezers who did not want to work or pay their doctors. Amid the poverty of the 1930s, a decision was made by Congress that putting those too old to work on an ice floe or leaving them to be eaten by bears was not the decent thing to do. We (they) created Social Security so the old and disabled would not have to starve or be a total burden to their (perhaps impoverished) relatives. It afforded them some dignity in their late years. It also took some people (finally) out of the labor force when jobs were scarce.
Then the government (Reagan Republicans as it happened) decided to follow the corporate example, and blend Social security into a leg of the Federal Employee Retirement System. Thus, it became an official part of a federal retirement system for government employees. The rationale was that the federal budget would absorb less of the cost of future retirement AND contribute to the Social Security Trust Fund. This model (pension, Social Security, and 401k) made sense -- even if it was crafted by conservatives. This should have put an end to the popular fiction that Social Security was "nothing but welfare," as J. Peter Grace (with that silver spoon in his mouth at birth) used to rant.
Private employers had already made a sililar decision about Social Security as part of retirement, and we have to live with it, even if the 401k leg is broken for many. But the federal printing press -- full faith and credit -- is behind the Social insurance contract of Social Security. Hell, if we can do it for AIG, we should be able to do it for the millions of Americans who had no choice but to pay the premiums to FICA. Call it a sort of insurance against pitchforks.
Medicare? No one asks you whether you want to pay the premiums, but look at your pay stub if you doubt it's insurance. It's the reason dad's heart bypass and mom's emergency stay in the hospital are not bankrupting the kids, or keeping the grandchildren from going to college. And if you think the medical profession does not like this "socialized medicine," ask your doctor whether he accepts Medicare. The AMA thinks it's a good idea, and so do I. It would be even better if that minimum wage kitchen worker making up the salad bar and the day care worker looking after your kids could have health insurance as well.
Frank T.

You must have Javascript enabled to use this form.

Frank T.

SSI and other stuff

One. SSI Supplemental Security Income while administered by SSA is not funded out of FICA and so in that sense not part of Social Security as defined.

Two. The idea that providing for widows and orphans is somehow welfare and not insurance is kind of a baffling concept, isn't that what people buy insurance for? In case of untimely death?

Three. DI Disability is funded out of its own dedicated FICA component and is once again a standard insurance product that say a self-employed person might buy. Lumping it in with SSI is just kind of ignorant even if the differences between somebody on SSI and somebody on DI are not that visible to the eye.

And yes there is some mild progressivity built into the system for lower income workers. On the other hand all Social Security beneficiaries enjoy a certain amount of progressivity from the system. The formula that adjusts initial benefits for overall Real Wage in the economy means that older workers who got left a little behind in terms of skill sets in their last working years still enjoy a boost in their ultimate living standard, in general each generation of retirees is able to buy a bigger basket of goods than the last. This doesn't translate to a higher replacement percentage just an acknowledgement that materially each generation has in the past advanced. I don't want to play the "when I was a kid" game but you can't compare the range of possessions of the typical middle class household of today to those of days past.

And finally I think you will find relatively few of those "actuarially based pensions" that come with inflation protection.

Calling any part of traditional Social Security welfare is kind of ridiculous, it is a combined disability policy and annuity with survivorship rights. You could find the functional equivalent at any private life insurance agent, though maybe not on such easy terms.

You must have Javascript enabled to use this form.