Published on: November 29, 2016
Social Security is one of the most prevalent lifelines available to American workers. According to statistics from the Social Security Administration’s (SSA’s) Understanding the Benefits publication, “about 60 million people receive monthly Social Security benefits.”
These benefits take many forms, from retirement benefits, to disability insurance, to supplemental income for the needy. How is it that Social Security can provide these benefits to so many Americans?
Here’s a brief explanation of how Social Security helps American workers through its various programs:
Retirement Benefits for Older American Workers
Back before the implementation of Social Security, the average American worker didn’t have access to steady post-retirement income. Pension plans would vary greatly by company—and often depended on the continued existence of the company after retirement.
Most wage-earning workers didn’t have access to personal retirement plans either—the cost of hiring an expert financier to build a retirement portfolio was out of their reach and doing it on their own would be a full-time job (the early 1900s hadn’t seen the introduction of the internet and affordable e-trading).
Social Security, when it was first introduced, helped to alleviate the financial burdens of retirement by providing retired workers with a one-time payment based on their contributions. Later, this would be converted into recurring monthly payments.
The money for these benefits comes from a special paycheck deduction. If you check your own workplace pay stubs, you should see a Social Security deduction on there. This money is placed in the Social Security fund to help finance the benefits of everyone on Social Security.
By giving workers a steady source of income in retirement, Social Security helped to make it easier to pay for basic necessities such as shelter, food, and medical treatment.
However, as noted in the Understanding the Benefits guide from the SSA, “Social Security was never meant to be the only source of income for people when they retire. Social Security replaces about 40 percent of an average wage earner’s income after retiring, and most financial advisors say retirees will need 70 percent or more of pre-retirement earnings to live comfortably.”
Modern Social Security makes things easier, but it’s still a good idea to not rely on just Social Security for income in retirement. Setting up a separate retirement portfolio to supplement your income is often a good idea to help ensure you can live comfortably in retirement.
Social Security and Disability Benefits
According to statistics from the SSA, “thirty-eight million disabled Americans, or 1-in-10, live with severe disabilities… The sobering fact for 20-year-olds, insured for disability benefits, is that more than 1-in-4 of them becomes disabled before reaching retirement age.”
The need to protect American workers from a total loss of ability to support themselves due to disabling conditions eventually led to the expansion of Social Security to include disability insurance.
Where a disabled worker would once be completely reliant upon family, existing assets, and charity alone for meeting their basic needs, they would now be able to use the income from Social Security Disability Insurance (SSDI) to help them cover their costs.
Additionally, Social Security created a program to help disabled individuals return to the workforce. The SSA’s Ticket to Work Program helps provide employment support to disabled individuals to return to work and still get healthcare or other benefits as needed. This is a great option for people who still want to work, but cannot work in the same capacity that they once did because of injury or illness.
By helping to cover the bills of disabled workers, and assisting in returning disabled workers to the workforce, Social Security helps to support the millions of disabled Americans throughout the country.
Providing Benefits for Families
What happens when a worker is so disabled that he/she can no longer manage his/her finances or, worse yet, passes away? Many retired or disabled workers have dependents that they need to care for such as a spouse and/or child.
Social Security has a set of benefits that can be paid to a worker’s dependent spouse or children in addition to the benefits to which they are entitled. This helps families cover basic necessities in the event that something happens to the primary wage earner.
Millions of Americans may be eligible for benefits on their parents’ or spouse’s work history and not even know it.
Supplementing the Incomes of Those in Need
Many years ago, there was a critical gap identified in the Social Security system: The Americans who didn’t have enough steady income to qualify for the existing Social Security benefits. To protect workers who couldn’t build up the work history needed to qualify for full benefits, a Supplemental Security Income (SSI) program was launched.
While not as robust as SSDI benefits, SSI helps those who suffer from limiting disabilities but don’t have the full work history needed for SSDI. This helps keep some people from falling through the cracks—but it isn’t perfect.
SSI benefits are very limited compared to SSDI, and the requirements to earn it can be very stringent.
Overall, by providing financial benefits for workers and their families—as well as support for returning to work—Social Security does an immeasurable amount of good for American workers.
It’s not perfect, but Social Security provides a vital lifeline to millions of Americans.