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THOMAS COLUMN: A note on Social Security

on Wednesday, 28 April 2021. Posted in Columns

In 1937, the first contributions were made to the Social Security Trust Fund mandated by the Federal Insurance Contributions Act (FICA). Since then, more than $8.7 trillion has been paid into the fund and more than $7.4 trillion has been paid out in benefits. The first monthly retirement check in the amount of $22.54 was paid in 1940 to a 65-year-old Vermont woman. She lived to be 100 years old and collected a total of $22,888.92 over 35 years. Changing demographics are affecting how Social Security is financed. In 1950, there were many more workers paying into the system than there were beneficiaries receiving income. For each beneficiary, there were more than 16 workers contributing to the trust fund. In 2016, there were about three workers paying in for each beneficiary receiving income. With the baby boomers about to retire, it is expected there will be only two workers for each beneficiary within the next 30 years. At this rate, there will not be enough workers to pay scheduled benefits at current tax rates. Stephen Gross, chief actuary of the Social Security Administration, estimates Social Security funds will fall short after 2037. This means that if there are no changes, the amount of benefits paid out will be decreased. It is likely that changes will be proposed to maintain full benefit payments to Social Security beneficiaries. It's important to realize that Social Security was never intended to replace pre-retirement income completely. Instead, its purpose is to provide a safety net so that Americans have a base level of retirement income. Social Security can be a source of lifetime income to supplement other income sources. This can help reduce your concern about meeting those expenses, and your spouse may continue to receive this benefit after your death. Social Security benefits are indexed to inflation periodically by the government and may help keep up with increases in the cost of living. As you think about planning for retirement, there are several steps you can take that can help you combine social security with various sources of your financial portfolio and help you meet financial needs. H. Michael Thomas is a financial consultant in Florence. Contact him at This email address is being protected from spambots. You need JavaScript enabled to view it..

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