Q & A
Ask Rusty – Why Don’t We Have a minimum Social Security Benefit?
Dear Rusty: I think we should have a Social Security baseline of $2,500 for each person. When I retire, my Social Security benefit will not be enough to survive. There are many of us who worked low paying jobs all our lives because we raised families and only started saving later in life. Considering all the money our government wastes on other countries and welfare programs for people who have not worked, it seems unfair that they will not reward those of us who contributed to society all our lives. Signed: Needs More Social Security.
Dear Needs More: For information, the concept of a “minimum” Social Security benefit is not new and, indeed, already exists – but it is one which few beneficiaries qualify for. The so-called “special minimum benefit” was meant to lift low-earning workers above the poverty line, but less than 32,000 SS beneficiaries (out of about 59 million retirees) currently qualify. That’s because Social Security’s benefit formula turns out to be more generous because it is based on lifetime earnings (wages), while the “special minimum benefit” program is based on consumer prices. That causes the SS benefit formula to provide a nigher SS benefit than is provided by the “special minimum benefit” option. In other words, people get a higher benefit because their SS benefit is based upon their actual lifetime earnings vs. an artificially created special minimum benefit. In short, the existing SS benefit formula usually provides more than the established “special minimum benefit.”
The SS benefit program is based on each person’s average monthly income over their lifetime. However, it is very important to understand that the program is also designed to provide a higher monthly benefit to those with a lower lifetime income. Thus, the percentage of “replacement income” for those with lower lifetime earnings is more than it is for those with higher lifetime earnings. Typically, a lower-lifetime income person will get about 40% of their average pre-retirement monthly income as their Social Security benefit, whereas a higher-income person will get about 20% or less of their pre-retirement monthly average income. In this way, Social Security is already a “progressive” program. But it’s important to understand also that Social Security, from its beginning, was never meant to provide 100% of a person’s income needs in retirement. Thus, each beneficiary should plan to supplement their retirement income in other ways (such as retirement savings, investment income, working longer, working part-time, etc.).
Having said that, it is also important to know that Social Security is a completely self-sustaining program and not dependent on general public funding, which would make it more susceptible to political shenanigans (imagine giving re-election seeking politicians easy access to Social Security’s separately held resources). While it is certainly true that the government spends freely on “welfare programs” for those who have not worked, Social Security is not a program which is dependent on government largesse. Rather, it is a benefit which is earned by working and contributing to the program, which provides retirement benefits based upon each person’s average lifetime work income.
If you expect financial difficulties when you retire, I encourage you to visit this website sponsored by the National Council on Aging (www.benefitscheckup.org). Here you can enter your zip code and find many public programs which you might be eligible for where you live, including assistance with healthcare costs, housing, utilities, etc.
This article is intended for information purposes only and does not represent legal or financial guidance. It presents the opinions and interpretations of the AMAC Foundation’s staff, trained and accredited by the National Social Security Association (NSSA). NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (amacfoundation.org/programs/social-security-advisory) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, all service are free.