Social Security Primer: History
BOSTON (CBS) - 94 percent of all workers, that's about 159 million, are covered under Social Security. Last year 55 million Americans received $727 billion dollars in benefits and nine out of ten individuals age 65 and older receive Social Security benefits.
Social Security has been around for 77 years. The Social Security Act was signed into law by President Roosevelt in 1935. This act created a social insurance program designed to pay retired workers age 65 or older a continuing income after they retired. The life expectancy of a 65-year-old then was about 10 years; today it's over 20 years.
Early on, benefits were only paid to the worker. In 1939 Congress added survivor benefits and benefits for the retiree's spouse and children. In 1956, disability benefits were added.
Another major change came about in 2000 with the Senior Citizens' Freedom to Work Act, which eliminated the earnings test for those beneficiaries at or above normal retirement age.
In the past, Social Security benefits had been conditional on the requirement that the beneficiary be substantially retired, meaning you could earn only a limited amount of money while receiving Social Security benefits. If you exceeded that amount, you would lose some of your future Social Security benefits.
This is no longer the case for those retirees who have reached their full retirement age, which for this year is 66. If you have retired early and are between the ages of 62 and 66, you could lose some of your future Social Security benefits if you go back to work and earn more than $14,640 this year ($1,220/month).
Social Security benefits have had a COLA, cost of living adjustment, since 1975. Only twice since then have we had a zero increase, last year and 2010. This year the adjustment was 3.6%.
I need to mention Medicare here briefly. The Medicare program was created in 1965 and it is a health insurance program for the retired population over age 65.
Medicare is in tough shape and if the trustees are correct the trust fund assets will be exhausted in 2036. Thereafter, incoming income would be sufficient to pay only about three-quarters of scheduled benefits.
I would expect for future retirees you will have to cover more of your own health care costs in retirement and the age for eligibility for Medicare to increase to match Social Security's. As for current workers what you will have to pay into Medicare taxes will increase.
One more thing: History of Automatic Cost-Of-Living Adjustments - Automatic benefit increases, also known as cost-of-living adjustments or COLAs, have been in effect since 1975.
