Anthony Taylor

FDR New Deal Project

U.S. History Honors
Mr. Lanford
13 December 2014
The Social Security Act gave elderly adults something to fall back on and young
adults something to look forward to in the future. During the Great Depression everyone
believed that he or she had to work everyday of their life in order to provide for their
family. However, when the Social Security Act was put into effect, people began to have
a different view on life. When people came to the realization that the government would
pay them for the rest of their life after the age of sixty-five, they began to have something
to work towards. But, that does not mean that the act was that simple. Citizens had to
follow the following guidelines in order to receive old-age benefits:

A person must work for ten years

Earn $4,800 minimum per year

* Old-age benefit amounts are generally related to the amount of Social Security payroll
taxes paid by workers over the course their lifetimes.[52] The Social Security
Administration has an Online Calculator that provides an estimate of monthly old-age
benefits based upon your earnings, birth date, and expected retirement age. The results
can be delivered in either today's dollars or in future (inflated) dollars.[53]
* People with lower incomes receive higher ratios of annual benefits to taxes.[54] The
graph below compares annual old-age benefits to lifetime payroll taxes for 23-year-olds
who will work until the age of 67 while earning constant incomes:

* Examples from the graph above:

a person who earns $15,000/year will pay $82,000 in payroll taxes (employer and
employee combined) over 44 years of work. When he retires, his annual benefit
will be $10,476 or 13% of his lifetime payroll taxes.
a person who earns $50,000/year will pay $273,000 in payroll taxes over 44 years
of work. When she retires, her annual benefit will be $21,672 or 8% of her
lifetime payroll taxes.
a person who earns $115,000/year will pay $627,000 in payroll taxes over 44
years of work. When he retires, his annual benefit will be $32,952/year or 5% of
his lifetime payroll taxes.
* For workers who earned average wages and retired at the age of 65 in 1980, it took 2.8
years of receiving old-age benefits to recover the value of their payroll taxes (including
interest). For workers who retired in 2003, it will take 17.4 years. For workers who will
retire in 2020, it will take 21.6 years. This assumes Social Security will have enough
money to pay scheduled benefits for this entire period, which it is not projected to have.
* Old-age benefits are generally increased each December based upon the rate of
inflation in the previous year. The benefit increase for 2007 was 2.3%; for 2008, 5.8%;
for 2009, 0.0%; for 2010, 0.0%; for 2011, 3.6%; for 2012, 1.7%; and for 2013, 1.5%.
* The age at which a worker receives full Social Security old-age benefits is referred to as
the "full retirement age." A person's full retirement age can range from 65 to 67 years old,

depending upon his or her year of birth. For those born after 1959, the full retirement age
is 67 (more details in footnote).
* Workers have the option to start receiving Social Security benefits at the age of 62, but
the benefits are reduced (more details in footnote). Workers also have the option to start
receiving benefits later than their full retirement age, and the benefits are increased (more
details in footnote).
* Family members of workers who are receiving old-age benefits may also be eligible for
benefits, even if they have not worked (more details in footnote).
* When Social Security first began, beneficiaries could take their benefits as a lump
sum. The earliest reported applicant for a lump sum Social Security benefit was Ernest
Ackerman of Cleveland, OH. Mr. Ackerman retired one day after the program began and
paid $0.05 in Social Security taxes. He received a lump sum payment of $0.17 or a 240%
return.