If you’re retired, or beginning to think about retirement, Social Security benefits are something you are, or are soon to become, familiar with. But do you know how the concept came about and the controversy that followed?
Social Security, or old age, survivor, and disability insurance, has been around in America in some form since the 1930s. After the stock market crash and Great Depression that followed, many individuals lost their retirement savings. As a result a staggeringly high number of older adults were living in poverty. Something had to be done. This led President Franklin Delano Roosevelt to incorporate the Social Security Act as part of The New Deal. It was signed in August of 1935, making FDR the first president in American history to publicly advocate for senior assistance.
Funded by a payroll tax, Social Security provides retired adults with a monthly check for living expenses. Social Security was, and remains, a controversial form of government assistance, because it deducts money from individual paychecks to distribute to retirees. However, FDR and his administration were quick to point out the benefits of this system for everyone. Social Security would encourage adults to retire in a timely fashion, thus opening up more jobs to young people and lowering the unemployment rate. Additionally, the younger generation paying into Social Security would see benefits of their own when they decide to retire.
Social Security has continually evolved since its inception back in 1935, with a number of additions and amendments changing the landscape of retirement. Originally, the plan didn’t cover all American workers, or even most of them. Women, minorities, and those who worked sporadically were blocked from receiving benefits, reflecting the inequality of the time. These exclusions were ultimately rectified over time, but for many years, almost half of the working population was exempt from receiving these government benefits.
Even today, many aren’t getting all they can out of Social Security benefits due to a lack of in-depth knowledge. While technically available to almost all workers now, the age at which you begin to collect can have a huge effect on how much you ultimately receive. Social Security statements can be confusing, and without an advisor, retirees may not be making the most fiscally responsible choices.
An article by CNBC says there is often a gap in understanding and that sometimes the word "retirement" is used as if it were the same as collecting Social Security. They are not one in the same and need to be thought of separately. There are two decisions to be made. When do you retire and when should you start collecting Social Security?
The future of Social Security is uncertain. Life expectancies have continuously risen since it was first put in place, and as a result, younger generations may not have as much in the way of benefits to depend on. But for now, the system persists, and it’s one that soon-to-be retirees need to pay attention to. To make the most of your Social Security benefits, you have to fully understand them. That means doing research, talking to financial advisors, and fully analyzing Social Security statements. The most important weapon in the fight for retirement savings is knowledge.