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10 social security figures every worker should know – the broken fool




Social Security is the nation's most successful social program, at least in the words of the hopeful president, Senator Bernie Sanders (I-Vt.) – and the data certainly supports this statement. After all, more than 63 million people each month, 70% of whom are retired, receive a monthly benefit check.

But as you may know, it is also a program that most workers generally misunderstand. Just take great pleasure in any social security check for confirmation. If you are currently in the workforce and expect to receive Social Security benefits when you retire, here are ten numbers you need to know.

  A person who secures the social security card between the thumb and index finger.

Image Source: Getty Images.

1. $ 1 trillion in revenue per year

First of all, you should understand how massive the Social Security program has become. Last year, Social Security generated $ 1 trillion in annual revenue for the first time in history, with the bulk of this revenue ($ 885 billion) derived from the 12.4% payroll tax on earned income. The rest came from tax on social security benefits (which I will touch on a little later), and interest income earned on the program's nearly $ 2.9 trillion in wealth reserves. These wealth reserves are invested in specially issued federal bonds that earn interest.

2. 22.1 million people kept out of poverty

Social security has proven to be an incredibly effective tool for keeping the elderly, as well as long-term homes, out of poverty. An analysis by the Center for Budget and Policy Priorities found that 22.1 million people were kept out of poverty every year as a result of the payment of social security benefits, including over 15 million retired workers. Without a monthly payment of national insurance, the poverty rate of the elderly would more than quadruple to more than 40%.

3. Your full retirement age (probably 67)

It is also important for employees to know their full retirement age (FRA). Your full retirement age is the age the Social Security Administration considers you eligible to receive 100% of your monthly benefit, determined by your year of birth. Claiming benefits before your FRA means accepting a lasting reduction in your monthly payout, while claiming after your FRA can actually increase your monthly benefit over 100%. Most future retirees will have an FRA of 67 years, although you can find your unique retirement age with this useful Social Security Administration table.

  An elderly man counting a discarded pile of cash in his hands.

Image Source: Getty Images.

4. $ 1,471 Average Monthly Performance

You should understand that Social Security will not get you rolling in the dough. The average retired worker brought home $ 1,470.83 a month, as of June 2019. While this works out to more than the federal poverty level on an annual basis, the total for a full year is "just" $ 17,650 when rounded. As you will see in the next paragraph, it is not designed to be a primary source of income.

5. 40% is the expected salary / salary replacement level

According to the Social Security Administration, your retired payroll worker is designed to replace about 40% of your pay or salary. Although this percentage may be slightly higher for workers with lower lifetimes, and lower for more affluent workers, the point is that benefits for social security are not expected to be more than a secondary source of income. In other words, Social Security earnings do not take the place you need to save and invest for the future.

6. 62% of retired workers make use of the payout for at least half of their income

As you probably assumed, few older workers actually follow the guidelines for compensation. The Social Security Administration found that 62% of retired workers use the program to provide at least half of their monthly income, and 34% rely on Social Security for virtually all of their income (90%-plus). As you will see in a forthcoming figure, Social Security's over-confidence for your monthly income can be dangerous.

  A person who fills out an application form for social security benefits.

Image Source: Getty Images.

7. 4% of retired workers claim social security at age 70

Retired employee benefits can be claimed at age 62, or any other point, with benefits growing by about 8% per year for each year as a person is making the payment, up to 70 years. Despite this dangling carrot with an incentive, a majority of retired workers require early benefits (at or before age 64), thus reducing their monthly payout to below 100%. Meanwhile, only 4% of retired workers wait as long as possible (70 years) to maximize their monthly pay. Interestingly, a recent study found age 70 as the best age limit for taking Social Security benefits, although there are still no sizes that are suitable for all ages.

8. About half of all older households pay federal tax on their benefits

Clear or not, there is a pretty good chance that you will pay federal tax for part of your Social Security benefits. If the modified adjusted gross income (MAGI), plus half of your Social Security benefits, exceeds $ 25,000, or $ 32,000 if you are a joint filing couple, you may be taxed on up to half of your federal general income tax benefit . Using the same MAGI plus half the formula above benefits, if you are over $ 34,000 as a single file, or $ 44,000 as a couple filing jointly, up to 85% of the benefits may be subject to federal tax. Today, about half of all older households owe taxes on their benefits, according to The Senior Citizens League.

9. 13 states tax benefits

Here's the moment "but wait, there's more." In addition to federal taxation, 13 states also tax social security to some extent. Quite a few offer very generous tax exemption levels, such as Missouri, where a single filmmaker and couple can earn up to $ 85,000 and $ 100,000, respectively, before facing state social security benefits. Even states that have mirrored the federal tax plan are getting a little more tax-friendly. Still, if you live in one of these 13 states, you may be hit with double taxation on your Social Security payout.

  Scissors cutting through a hundred dollar bill.

Image Source: Getty Images.

10. 2035 is when the program could deplete wealth reserves

Finally, as promised, being too dependent on social security may come back to haunt you. The latest annual Social Security Board of Trustees report estimates that the program's nearly $ 2.9 trillion in asset reserves will be completely exhausted by 2035, with a number of demographic changes resulting in larger net cash outflows each year. Although the insurance will not go bankrupt – the repeated sources of income prevent insolvency – managers report projects that benefits can be reduced by up to 23% for pensioners in 2035 to secure payments through 2093. This is even more reason why Social Security should be considered an additional cost , not primary, income source under retirement.



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