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Hello, Social Security!

Originally known as the “Economic Security Bill,” President Franklin Delano Roosevelt’s main objective in 1935, as part of the New Deal, was to pay financial benefits to retirees over age 65 based on lifetime payroll tax contributions. Before then, support for the elderly fell to states, towns and families.

Congressman Frank Buck (D-CA) made a motion in March to change the name to the “Social Security Act of 1935,” citing this description:

“An act to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provisions for aged persons, blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration of their unemployment-compensation laws; to establish a Social Security Board; to raise revenue; and for other purposes.”

It Has Come a Long Way  

According to the Social Security Administration, all benefits will be paid “in full and on time” until 2035. Even if legislative changes are not made before 2035, they say they will be able to pay 79 percent of each benefit due.

Today’s Social Security program is still the largest income provider for about 64 million people, delivering the base of financial protection for working people and their families when earnings are lost due to retirement, disability or death – all three possibilities due to COVID-19. However, Social Security benefits do not pay enough to live on in retirement and supplemental income is required.

“The fact is 65 percent of people who receive Social Security over the age of 85 are women,” says Erin Weber, CFP®, CPFC®, Associate Vice President at Hefren-Tilloston. “In 2020, the average Social Security income for women 65 and older is around $15,564. And 58 percent of working women expect to live off of Social Security. That’s when it really becomes an issue.”

The program is based on contributions that 178 million workers make today into the Social Security system. Years of Federal Insurance Contributions Act (FICA) taxes withheld from paychecks are incorporated into the program’s income to benefit others.

Medicare benefits – a separate program – are also considered part of Social Security benefits. Your Medicare contributions are withheld from your paychecks in much the same way as your Social Security contributions are; FICA taxes support Social Security and Medicare.

Additionally, not only are you covered in the event of a disability, your biological children or stepchildren may be covered if he or she becomes disabled before age 22. Your spouse may also receive survivor benefits as long as you have accumulated the required 40 credits before your death.

Social Security’s commitment extends to LGBT individuals and recognizes same-sex couples’ marriages in all states. They also recognize some non-marital legal relationships, such as civil unions and domestic partnerships, for purposes of determining entitlement to Social Security benefits, Medicare entitlement, and eligibility and payment amount for Supplemental Security Income (SSI).

Same-sex marriages and some non-marital legal relationships established in foreign jurisdictions for purposes of determining entitlement to Social Security benefits are recognized as well.

Social Security Taxing

Probably the two most important things to remember about Social Security are: (1) it is supplemental income, not primary income, (2) the income benefits are taxable up to 85 percent, depending on the individual’s total annual income. The Benefit Statement, also known as the SSA-1099 or the SSA-1042S, is the tax form mailed each January to those who received Social Security benefits for the previous year.

You will pay tax on up to 85 percent of your Social Security benefits, based on Internal Revenue Service (IRS) rules if you:

·        File a federal tax return as an individual, and your combined income – that is, your adjusted gross income (AGI) + nontaxable interest + 50 percent of your Social Security benefits – is more than $34,000.

Between $25,000 and $34,000, you may have to pay income tax of up to 50 percent of your benefits.

·         File a joint return, and both you and your spouse have a combined income between $32,000 and $44,000. You may have to pay income tax of up to 50 percent of your benefits.

More than $44,000, and up to 85 percent of your benefits may be taxable.

“We don’t know if Social Security will be there in its full capacity in the future, so think of it as the ‘icing’ on the cake,” Weber said. “It is not going to be the meat and potatoes of your retirement funding, but it can be more like your extra spending money.”

If you have questions about Social Security, visit, or call1-800-772-1213. To learn more about how it fits into your overall retirement planning, contact us!

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

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