Many employers have shifted from offering traditional defined-benefit pension plans, which guarantee a certain benefit level upon retirement, toward defined-contribution plans (such as 401(k)s), which pay a benefit based on a worker’s contributions and the rate of return they earn. But benefits for a high earner (with 160 percent of the average wage) replace about 30 percent of prior earnings, though they are larger in dollar terms than those for the low-wage worker. For example, benefits for a low earner (with 45 percent of the average wage) retiring at age 65 in 2021 replace about half of their prior earnings. Social Security benefits are progressive: they represent a higher proportion of a worker’s previous earnings for workers at lower earnings levels. The higher their earnings (up to a maximum taxable amount, $147,000 in 2022), the higher their benefit. Social Security benefits are based on the earnings on which people pay Social Security payroll taxes. Some 7 percent of recent entrants to the labor force will die before reaching the full retirement age, and many more will become disabled.įact #2: Social Security provides a guaranteed, progressive benefit that keeps up with increases in the cost of living. The risk of disability or premature death is greater than many people realize. About 89 percent of people aged 21-64 who worked in covered employment in 2020 are insured through Social Security in case of severe disability.For a young worker with average earnings, a spouse, and two children, that’s equivalent to a life insurance policy with a face value of nearly $800,000 in 2020, according to Social Security’s actuaries.About 96 percent of people aged 20-49 who worked in jobs covered by Social Security in 2020 have earned life insurance protection through Social Security.In addition to Social Security’s retirement benefits, workers earn life insurance and SSDI protection by making Social Security payroll tax contributions: While older adults make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance (SSDI) or were young survivors of deceased workers. residents, collected Social Security benefits in January 2022. Over 65 million people, or more than 1 in every 6 U.S. It also provides important life insurance and disability insurance protection. Fact #1: Social Security is more than just a retirement program. Eighty-six years after President Franklin Roosevelt signed the Social Security Act on August 14, 1935, Social Security remains one of the nation’s most successful, effective, and popular programs.
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