Social Security is known as a supplemental retirement income program for Americans, but it also offers benefits to disabled employees, spouses, and dependents. The numbers behind the Social Security program can be staggering, but they’re also fascinating.
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Whether you’re planning your Social Security benefits, already receiving payments, or just interested in the facts and figures surrounding the program, here’s a look at some of the numbers behind the massive government program.
2035
Since the program is currently structured, 2035 will not be a happy year for Social Security recipients. In that year, the Social Security Trust Fund is expected to be exhausted. While that sounds ominous — and it’s certainly not a good thing — it doesn’t mean Social Security is going away.
But it does mean that unless changes are made, benefits should be reduced. Since Social Security is such a political hot button, it’s likely that there will be some changes before then. However, when planning your lifetime benefits, it is wise to consider the possibility that your benefits may not be quite what you expect.
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22%
Unless Congress takes steps to bolster Social Security funding, 22% is the amount to be cut in 2034. be devastating.
However, with the expected depletion of the Social Security Trust Fund, benefits will have to depend on the payroll tax contributions of existing employees. With the number of retirees growing in proportion to the number of employees, this 22% reduction will be necessary without changes to the Social Security program.
$1,236
Social Security is best known as a retirement income program, but it also pays significant benefits to disabled employees. As of May 2022, the average disabled worker received a monthly benefit of $1,236 from Social Security. Social Security disability insurance was $145 billion in 2019 and makes payments to 8.2 million beneficiaries and 1.4 million dependents.
$1,657
According to the Social Security Administration, the average retirement benefit paid to eligible recipients in 2022 was $1,657. The maximum Social Security benefit in 2022 is $4,194 per month for people retiring at age 70, $3,345 at full retirement age, and $2,364 at age 62.
$4,194
The size of your Social Security retirement benefit is based on a number of factors, including when you apply for your benefit. While you can start receiving benefits as early as age 62, the full retirement age for most Americans is 67. But if you wait for your benefits to start even longer, until age 70, your payout amount will increase by 8% per year from age 67 to 70. For top earners who have maximized their income while working, the highest available retirement benefit in 2022 $4,194.
5.9%
Each year, Social Security payouts are subject to an inflation adjustment known as the “cost of living adjustment” or COLA. Since inflation has generally been moderate in recent decades, Social Security beneficiaries have only received COLAs of a few percentage points or even less. However, with inflation rising in 2021, 2022 recipients will see a 5.9% increase in their Social Security benefits. This is the highest COLA in 40 years.
$147,000
Most of Social Security funding comes from payroll taxes on existing employees. High earners, however, do not have to pay tax on all their income. Each year, the Social Security Administration publishes its “wage base” figure, which is the amount of income that is taxable for social security purposes. For 2022, this amount is $147,000. Like the COLA for Social Security payouts, the wage base figure is revised annually based on the rate of inflation. For 2022, the wage base increased significantly from $142,800 in 2021.
12
In most states, Social Security is not considered taxable income. However, 12 states do impose income taxes on Social Security benefits. Here are the 12 states that impose some sort of Social Security tax:
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Colorado
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Connecticut
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Kansas
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Minnesota
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Missouri
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Montana
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Nebraska
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New Mexico
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Rhode Island
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Utah
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Vermont
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West Virginia
Note that most states do not tax all Social Security income. For example, Kansas levies a tax of 3.1% to 5.7% on all income, but exempts Social Security income for residents with an AGI of up to $75,000. Most other states have similar types of exemptions.
65 million
According to the Social Security Administration, an average of 65 million Americans received monthly benefits in 2021. With a current population of approximately 332 million, this means that nearly 20% of all Americans receive benefits from the Social Security program on a monthly basis. This number is only expected to increase as Americans live longer, part of the reason the Social Security program could be in trouble as early as 2035.
>$1 trillion
While the sheer number of Americans receiving Social Security benefits is impressive, the amount of money paid to these beneficiaries is hard to fathom. Figures from the Social Security Administration show that more than $1 trillion was paid in benefits in 2021 alone. This is another number that will increase as the number of retirees grows. According to the SSA, in 1940, a 65-year-old had a life expectancy of just 14 years; in 2021 that was 20 years. Since longer life equates to higher total payouts, Social Security will have to solve its funding problem if it is to avoid future cuts in benefits.
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This article originally appeared on GOBankingRates.com: 10 Numbers You Should Know About Social Security
