Lessons from Social Security's 80-year history

The program's anniversary underscores its crucial role in retirement security

By Mary Beth Franklin

Aug 11, 2015 @ 12:01 am EST

President Franklin D. Roosevelt signed the Social Security Act into law 80 years ago on Aug. 14, 1935. Over the past eight decades, the Social Security program has expanded from a retirement program for workers to a broader safety net that includes dependent benefits for spouses and minor children, survivor benefits and disability benefits.

During those 80 years, no beneficiary ever missed a check. Even when the Social Security system was threatened with insolvency in 1983, Congress intervened in the nick of time to approve a reform package that kept benefits flowing for the past 32 years. The crucial retirement and survivor program is expected to have sufficient revenue to continue paying full benefits through 2034, but unless Congress steps in again, disability benefits for 11 million workers could be cut by about 20% late next year.

In the meantime, let's review some of the highlights of the program's last 80 years, thanks to the Social Security Administration's anniversary trivia page.

Social Security is a crucial part of retirement security. More than half of married couples age 65 and older and nearly 75% of unmarried elderly individuals rely on Social Security for 50% or more of their retirement income. For about one-third of elderly benefits, Social Security benefits provide 90% or more of their income.

When the new Social Security Board was created in 1935, it had no staff and no budget. Existing federal agencies donated the initial employees. By 1936, 2,000 employees were assigned the task of issuing Social Security numbers to 26 million workers. My, how times have changed. The Social Security Administration now has a $12.5 billion budget and employs more than 60,000 workers.

Initially, payroll taxes were low and so were benefits. Payroll tax withholding for Social Security began Jan. 1, 1937. The original contribution rate was 1% each for employers and employees on wages up to $3,000 per year for a maximum combined contribution of $60 per year. In 2015, the contribution rate is 6.2% for both the employer and employee, up to $118,500 for a total combined contribution of $14,694 per year.

On Jan. 31, 1940, Social Security issued the first monthly retirement check in the amount of $22.54 to Ida May Fuller of Ludlow, Vt., who retired the year before from her job as a legal secretary. She paid a total of $24.75 in Social Security taxes on her salary during the three years she worked under the program. It turned out to be a very good deal for her. Ms. Fuller lived to 100 and collected more than $22,000 in Social Security benefits over her lifetime.

Over the past 80 years, Social Security has issued more than 453 million different Social Security numbers. There are about one billion possible combinations of the nine-digit number, leaving plenty available for future generations. Social Security numbers are not reassigned after a number holder's death.

Originally, the first three digits were referred to as the “area number” reflecting the state where the number was issued. The lowest numbers were issued on the East Coast; the highest in the West. Later, when all numbers were issued from the central office in Baltimore, the first three digits were based on the zip code of the applicant. But in June 2011 Social Security changed how it issued new Social Security numbers, shifting to random assignment. That means the first three digits of newer Social Security numbers no longer have any geographic significance.

One particular Social Security number proved to be extremely popular. In 1938, a wallet manufacturing company included a sample Social Security card in each wallet. The sample card had the actual Social Security number of the company's vice president's secretary. Until the number was voided, more than 40,000 people had attempted to use that number!

In 1937, Congress amended the Social Security Act to include survivor benefits. And in 1956 it added disability benefits.

Over the years, the Social Security Administration has shifted more and more of its services online to serve millions of workers, retirees and their families.

(More: The story of the first Social Security beneficiary)

Americans can now set up personalized Social Security accounts online to track their reported wages, payroll tax contributions and estimated benefits throughout their careers. They can use the online retirement estimator tool to see how working a few years longer or retiring early may affect their future benefits. And since 2000, individuals have been able to apply for retirement benefits online. Now, that's how more than 50% of applicants file for benefits.

Despite being the repository of information about critical information about retirement, disability and survivor benefits, you'll never guess what the most popular search topic on ssa.gov is: most popular baby names. Yep, the annual list begun in 1998 receives about 3 million hits a year. Back then, Michael and Jessica snagged the top spot. In 2014, Noah and Emma led the list.

(Questions about Social Security? Find the answers in my ebook.)

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