Social Security’s Finances: Follow Up on a Question
A few days ago, I wrote an article discussing Social Security and its finances. In the comments, one of TAH’s regular readers (ex-OS2) asked two questions – one of which stumped me royally.
So I got curious, and decided to poke around a bit and see if I could find an answer.
While I didn’t find the precise answer, I did find the answer to a couple of similar and related questions. And the questions seemed to be ones that might be of general interest, so I decided to post the answers here.
The question I couldn’t answer was, “What fraction of Disability payments are made to those who never contributed?” That in turn raises a bigger question: “What fraction of Social Security recipients overall (Disability, Old Age, Survivors) fall into the ‘never contributed’ category?”
Yes, that’s indeed possible. Social Security pays benefits to spouses, survivors, and dependents under many circumstances. Sometimes those beneficiaries in fact never have paid FICA taxes themselves. But they still qualify based on the worker’s earnings history.
As I surmised might be the case, Social Security doesn’t make it particularly easy to find this information, and I can’t say with that I found the precise answer to either the question concerning disability or the larger question for Social Security overall. But I do think I found enough information to answer a closely-related question: “How many people are receiving benefits based on someone else’s earnings history, and how much do those benefits total?”
It turns out that Social Security does publish one report monthly that gives useable data here: their monthly “snapshot” report. The latest one I could find was for July 2016. Apparently it takes a bit of time to get the necessary data, because August’s report doesn’t yet seem ready.
Here are the pertinent numbers in table form. The snapshot for July 2016 can be downloaded, in PDF format, here.
| July 2016 – Social Security Benefits Paid, Summary | Number of Beneficiaries (x 1,000) | Percent of Beneficiaries | Benefits Paid (x $1M) | Percent of Benefits Paid | Average Monthly Benefit |
| Grand Total | 60,505 | 100.0% | $74,854 | 100.0% | $1,237 |
| Old Age/Survivors – Total | 49,841 | 82.4% | $63,890 | 85.4% | $1,282 |
| Retirement Benefits – Total | 43,831 | 72.4% | $57,167 | 76.4% | $1,304 |
| Paid to | |||||
| Retired Workers | 40,817 | 67.5% | $55,086 | 73.6% | $1,350 |
| Spouses of Retired Workers | 2,369 | 3.9% | $1,660 | 2.2% | $701 |
| Children of Retired Workers | 645 | 1.1% | $421 | 0.6% | $652 |
| Survivor Benefits – Total | 6,010 | 9.9% | $6,722 | 9.0% | $1,119 |
| Paid to | |||||
| Children of deceased workers | 1,852 | 3.1% | $1,542 | 2.1% | $833 |
| Widowed mothers/fathers | 134 | 0.2% | $126 | 0.2% | $943 |
| Nondisabled widow(er)s | 3,763 | 6.2% | $4,866 | 6.5% | $1,293 |
| Disabled widow(er)s | 260 | 0.4% | $186 | 0.2% | $717 |
| Parents of deceased workers | 1 | <0.002% | $1 | 0.0% | $1,142 |
| Disability Benefits – Total | 10,664 | 17.6% | $10,965 | 14.6% | $1,028 |
| Paid to | |||||
| Disabled workers | 8,861 | 14.6% | $10,335 | 13.8% | $1,166 |
| Spouses of deceased workers | 138 | 0.2% | $44 | 0.1% | $323 |
| Children of deceased workers | 1,666 | 2.8% | $585 | 0.8% | $351 |
In looking at the table above, it’s pretty apparent that some of those individuals receiving benefits are receiving those benefits based on another individual’s Social Security record. For disability, that is benefits paid to spouses and children. For Old age And Survivors, that would be those benefits paid to spouses and children of retired workers. By definition, it also includes all forms of survivor’s benefits that Social Security pays regarding deceased retirees. All of these categories of persons are eligible to receive benefits from Social Security based on the worker’s earnings history under the proper circumstances.
Doing the math, I came up with an approximate answer to the question for disability. Social Security paid disability benefits to roughly 10,664,000 persons in July 2016. Of those, 1,804,000 – or a bit more than 1 in 6 – were NOT disabled workers; the vast majority of that number (1,666,000) were children. It’s a virtual certainly that they never paid a dime in FICA taxes. The remaining 138,000 were disability benefits paid by Social Security to selected spouses of disabled workers; these are paid based on the worker’s qualification to receive disability benefits, and thus were due to the disabled worker’s earnings record. However, it’s possible that some of these spouses indeed worked and paid FICA taxes at some point in their lives – so I can’t say with certainty that they “never paid into” Social Security.
In dollar terms, these disability payments to spouses and children appear quite modest. They represent only about 5.7% of Social Security’s total disability outlays.
The situation is somewhat different for Social Security retirement and survivor benefits. These payments are both more numerous and proportionally more costly than payments made to children and spouses of disabled workers.
Spouses and children of retired workers receiving benefits from Social Security on the basis of the retired workers earnings histories totaled 3,041,000; benefits were also paid to 6,010,000 survivors of deceased workers. The total of these categories – 9,024,000 – represents 20.6% of those receiving Old Age and Survivor’s benefits from Social Security – or just over 1 in 5. These payments constitute approximately 15.4% of all Social Security Old Age and Survivors benefits paid.
Summing both categories (Disability and Old Age/Survivors), it turns out that a bit less than 18% (17.9%) of those receiving benefits from Social Security are receiving benefits on the basis of another individual’s work history. Those benefits represent 12.6% of all Social Security benefits paid.
A caveat: many of these spouses receiving benefits on the basis of a spousal work history indeed may have paid FICA taxes themselves. A person can qualify for Social Security based on both their own work history and that of their spouse. They’re allowed to choose to receive whichever benefit that is more advantageous financially. So in many cases, the individuals would be entitled to a benefit – but a smaller one – based on their own work history.
I hope someone besides me finds this information interesting or of use.
Category: "The Floggings Will Continue Until Morale Improves", "Your Tax Dollars At Work", Society
You forgot one catagory which is becoming more relevant with this pres and hillarys promise. Refugees are immediately eligable for SSN, disability and welfare
I had a girlfriend a number of years ago whose husband had died and was getting survivors for her daughter. She didnt need it but couldnt get it turned off so saved the payments and bought her kud a car when she turned 18
You may be thinking about SSI vice Social Security, jonp. While both programs are administered by the Social Security Administration, they are completely separate programs with very different eligibility criteria and are funded very differently.
SSI is pure welfare. Social Security at least requires payment of a particular type of payroll taxes (FICA) for a period of time to gain eligibility for benefits.
SSI is funded by the Treasury directly using general fund dollars – AKA money obtained from sources other than FICA payroll taxes. Social Security is funded largely by FICA payroll taxes, with minor amounts coming from “trust fund” interest and Treasury reimbursements for defined items.
Refugees admitted or granted asylum in the US are indeed eligible for SSI. However, they do not appear to be eligible for Social Security disability or retirement payments unless they meet eligibility requirements – which means they must be working (or have worked) and paid FICA taxes for the requisite amount of time.
https://www.ssa.gov/ssi/spotlights/spot-non-citizens.htm
Oh, i thought it was all under one roof. I stand corrected
This is not news to me. My mother worked until she was 62, then retired. My father worked until he was 65 and then retired.
My mother had a choice between her own SocSec benefit or a dependent’s benefit, and going on my father’s benefit, the dependent’s was more than her own. When he died, hers was bumped up again.
However, because that was in the 1980s, the benefit dollar amounts were considerably less than they are now.
Wasn’t news to me either, Ex-PH2. But until I researched the numbers I had no idea what fraction of Social Security beneficiaries were receiving benefits based on another individual’s income.
In fact, it’s entirely possible that the numbers above grossly understate the fraction of people doing that.
According to the numbers above, there are 43,831,000 individuals receiving Social Security “retired benefits”. However, according to the Social Security Administration (SSA) only 2,369,000 “spouses of retired workers” are receiving benefits.
I have a hard time believing that only a bit over 5.4% – or a bit over 1 in 20 – of those receiving Social Security “retired benefits” are spouses who are receiving benefits on their spouse’s work record – because this means that all the other spouses of retired workers qualify for a larger Social Security benefit based on their own work record. I think the SSA is lumping anyone who ever paid enough FICA taxes to qualify for and is receiving benefits into the “retired worker” category – whether or not they’re receiving benefits on another person’s work record.
That might not be the case, and the numbers above may be 100% accurate and aboveboard. But I’d have to see a helluva lot more data to believe it.
That makes sense to me, too.
My wife and i are running the numbers on just this thing now. One of us retire at 62 the other a few years later
There is one other thing that is not listed in this and that according to the Social Security Employee that handled my case the work history is only based on the last time 5 jobs that the individual had not on his full work history And was this always the way it was or were these rules written after congress passed bills to appropriate the money to for other things
I believe you misunderstood the Social Security representative you spoke with. Social Security retirement benefits are based on the earnings, indexed for inflation, for your highest 35 years of earnings for which you paid FICA taxes.
A detailed explanation of how they are calculated can be found here.
https://www.thebalance.com/social-security-benefits-calculation-guide-2388927
A quick and dirty worksheet-based method allowing you to calculate your own Social Security benefit if you’re retiring this year can be found here:
https://www.ssa.gov/pubs/EN-05-10070.pdf
There was a 3 month period before I turned 18 that I drew a monthly check based on my Dads benefit (he had recently retired at 65). I used the money to help with my truck payments.
I had worked summer jobs for 2 years where I had paid taxes, the small checks that I recieved may not have exceded the amount that I had already paid in, if they did I am sure I have paid that amount back thru the years and then some.
I recently took early retirement. That in addition to my military retirement and other investments I have. I am also debt free.
What’s nice is that I am able to leave some money to my favorite charity, the Fisher House Foundation. I planned and saved throughout my life and now am in a position where I can do what I want.
Of course it’s hard to find the info, Hondo. Just like a lot of states (predominantly liberal, go figure) never discuss how many government employees they have.
Don’t believe me? Find out how many state and municipal employees are in Massachusetts. I’ve tried, without success.
SEA, I found a few resources for you:
https://massfinance.state.ma.us/CommonCents/commonEmployeeResult_new.asp?pg=6&cat=employee&num=1
http://opencheckbook.itd.state.ma.us/analytics/saw.dll?Dashboard&PortalPath=%2Fshared%2FTransparency%2F_portal%2FAdditional%20Spending&Page=Payroll
Thank you for the research on that Hondo. I find it very interesting indeed.
Think it was just recently, 2009 or so, that the folks who were retiring were going to get less than they contributed – what with that 35 year work history and inflationary adjustment common in the late 20th, prior to that most people received more in SS payments than they had paid in. Those of us retiring after that, well, BOHICA.
I am definitely going to get less than I contributed.
I 1st retired in 2012 after 20 in a school system where I didn’t contribute to the SS scam the entire time. But that was after another 25 where I did contribute, and now in another job where I am now contributing.
But because some bureaucrat decided I’d be double-dipping and didn’t deserve the money I contributed… my SS check are going to be docked a significant percentage – and my wife’s already are being docked.
I’m paying now more into SS per month than we together could get out of it.
It is a government run scam. It has always been a government run scam. And the bureaucrats who perpetuate the continuation of this as a scam need to all be cut off from all retirement benefits and forced to live on 50% of the average welfare their home state pays to their lowest-paid recipients.
Two different reductions may be in play, Greybeard. And you may be able to eliminate one of them entirely. They’re the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP).
The GPO applies to spousal benefits only. As a recipient of a pension from non-covered work, you’d fall into that category if you were receiving Social Security spousal benefits. Your wife might as well – not sure how your pension from work not covered by Social Security would affect any spousal benefits she’d rate on your work record, or on hers.
https://www.ssa.gov/pubs/EN-05-10007.pdf
A second provision, the Windfall Elimination Provision, would indeed appear to apply to you. It applies to those who (1) receive a pension for work not under Social Security, and (2) have less than 30 years of “substantial earnings” under Social Security. You’re affected because you have less than 30 years of Social Security “work credit” – e.g., less than 30 years of work where you earned enough income on which you paid FICA taxes to count as a year under Social Security. I’m pretty sure that means if you were you to perform enough part time work covered by Social Security to get another 5 years credit, the WEP reduction goes away entirely.
A “qualifying year” under Social Security today requires earning somewhere around $5500 in earned income subject to FICA taxes during the year, whether the work is done all at once or spaced out throughout the year.
https://www.ssa.gov/planners/retire/wep-chart.html
This latter document also lets you estimate how badly you’re going to get boned with 25 years of covered work under Social Security.
Might be worth looking into. Your call.
Thanks!
The Mrs. didn’t work that many years – focused on being a mother to our kids instead. That probably is part of the impact.
Now that I’m back in a SS-gouged job, and plan to be for a few more years, I may hit that 30 and get it back when I do have to retire again. But who knows what the Feds will do between now and then.
I just hope that neither my 1st or (if I make it that far) 2nd retirements get gutted.
…and it is the “Windfall Elimination” excuse they are using, although I cannot see how it is a “windfall” when I had to work my tail off for everything we got – and was below poverty level for at least the first 20 years of our marriage. But that’s another rant. 🙂
The explanation is long, but the gist of it is that Social Security is by design somewhat in accordance with the Marxist tenet, “From each according to his ability; to each according to his need.” To be blunt: it discriminates against higher earners to the benefit of career low-wage earners. Higher income workers subsidize lower income ones. By design, Social Security replaces a much larger fraction of a lower-income worker’s income than it does for career high-income workers. I can’t remember the precise amounts, but as I recall the monthly benefit for a minimum wage earner at full retirement age is a bit over $900 monthly. Someone who earned the maximum subject to Social Security every year in a 40 year career would pay nearly 8x as much in total FICA taxes – but would receive less than 3x as much as a monthly benefit. Why? Because “the rich guy doesn’t need it as much”. They conveniently ignore the fact that the “rich guy” also paid WAY more in FICA taxes. Social Security assumes a full career under FICA taxation. As a result, if you have “gaps” in your earning history from work not subject to FICA taxes, you end up with a low average indexed monthly earning – which in turn means Social Security treats you as a career low income type. In reality, you weren’t; but Social Security also didn’t get their full “cut” of that other income. The WEP is an attempt to “correct” for that – as well as yet another excuse to impose the above Marxist principle. You have another pension, so you don’t “need” to have your pension calculated the same as someone who flipped burgers at McDonald’s for 35 years because they quit school and made no attempt to better themselves. You also didn’t work a full career (35 or 40 years) under Social Security. So from that perspective, there is some justification for treating you differently on that basis as well. They just don’t apply that justification to everyone. I can actually see some justication for both points of view. Of course,… Read more »
That actually happened for high earners back in the 1990s. But for median wage earners, that’s a recent development.
What I’ve seen said that median-wage folks started getting the shaft on that score around 2012. But I don’t think there’s a precise date (it’s estimated), and it’s also dependent on lifetime income. And in any case, 2009’s in the ballpark of when it started to become the common case.
I don’the know if this, my first post/reply, will be accepted,but here goes.
Whenjoy my wife turned 65, we went to a local SSA office and she tried to get her Retirement benefit started since she had to get Medicare A and B started so TRICARE wouldn’t drop her coverage, her being the wife of a Retired MARINE MSGT(me). She didn’t have enough creditable qtrs. So, I went ahead and started my SS Retirement check and she gets a spousal benefit equal to half of the value of the check I get. My SS credit is based on the
20 yrs in the job I took after retirement from The Marine Corps, and the last 15 yrs on Active duty.
Semper Fi and carry on, meanwhIle back into lurking mode.