Social Security turned 75 last month, and many facets of this huge institution are not widely known. Here are seven things you should know about Social Security, according to an article by U.S. News and World Report reporter Emily Brandon.
1. It's not only a retirement program. Disability benefits and payments for a beneficiary's spouse and children were added to the program. Annual mailings to all workers age 25 and older include an estimated amount you would be paid if you become disabled and how much your spouse and children would receive if you should pass away.
2. You pay 6.2 percent of your income into the system. Ninety-four percent of American workers pay 6.2 percent of their taxable income, up to $106,800 annually, into the fund. Employers pay a matching 6.2 percent for each worker. Self-employed workers must contribute 12.4 percent of their income annually.
3. Annual cost-of-living adjustments didn't exist until 1975. Before 1975, an act of Congress was required to increase benefits to keep up with consumer prices. Now increases in payments are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. Increases have ranged from 1.3 percent in 1996 and 1998 to 14.3 percent in 1980. In 2010, there was no cost of living adjustment because the index did not increase between the third quarter of 2008 and 2009.
4. Retirees can increase annual payments by waiting to claim. Workers can begin receiving Social Security benefits at age 62. But payouts increase by 7 to 8 percent for each year you delay your start date, up until age 70.
5. Existing beneficiaries can get a do-over. If you've already signed up for Social Security and received a reduced payout, it's not too late to boost your check. If you pay back the entire amount you have already received from Social Security without interest, you can then qualify for higher payments for the rest of your life.
6. Paper checks will soon be retired. Recipients will be required to collect payments by direct deposit into a bank account or a government Direct Express Debit MasterCard beginning on March 1, 2011. Existing beneficiaries must switch to electronic payments by March 1, 2013. Paperless payments are expected to save $300 million over five years, according to Treasury Department estimates.
7. The trust fund has a projected deficit. The fund is currently expected to provide payments until the end of 2037. Unless changes are made to the program, there will only be sufficient resources to pay about 78 percent of scheduled benefits. Congress is currently weighing possible fixes, including tax increases, benefit cuts and pushing back the retirement age. The U.S. Senate Special Committee on Aging report released in May found somewhat minor changes could put the fund back on sound financial ground for at least 75 more years.
Source: Yahoo! Finance