Social Security facts and figures. Where AARP stands in the debate over solvency in the coming years and more.

1. Social Security: An Overview
AARP Illinois
June 2011

2. Agenda
Social Security:
• Basics
• Eligibility
• Funding
• Benefits
• Trust Funds
• Solvency
AARP 2

3. Social Security Defined
Social Security established in
1935, motivated because of the
Great Depression. Social
Security provides guaranteed
retirement, disability and
survivor benefits to eligible
workers.
AARP 3

4. Benefits Received
By Beneficiary Type
• Retired – 67.2%
• Disabled – 17.7%
• Survivors – 15.1%
AARP 4
Social Security Administration 2010

5. Earned Benefit
Social Security is an earned
benefit. A worker must pay
into the system for 40 quarters.
Requirements for disability
and survivor benefits depend
on age of disability and death.
AARP 5

6. Full Retirement Age is
Increasing Age for Full/Normal Retirement Benefits
If you were born Retirement age
in: Year Months
1937 or earlier 65 0
1938 65 2
1939 65 4
1940 65 6
1941 65 8
1942 65 10
1943 54 66 0
1955 66 2
1956 66 4
1957 66 6
1958 66 8
1959 66 10
1960 or later 67 0
Source: Social Security Administration, Social Security Handbook (13th ed.), 1997. AARP 6
Prepared by AARP Public Policy Institute.

7. Near Universal Coverage
• 94% of workers are covered under
Social Security
• In IL, some state and local govt.
workers and teachers participate in
alternative retirement system
AARP 7

8. Social Security Funding
Interest Taxes on
earned on benefits
Trust Fund 3%
assets
15%
Payroll
Taxes
82%
AARP 8
Social Security Administration 2010

9. 2010 Average Monthly
Social Security Benefit
•Retired worker - $1,175
•Disabled worker - $1,068
•Survivors - $994
Social Security Administration 2010 AARP 9

10. Social Security Cost of
Living Adjustment (COLA)
• COLA’s based on consumer price
index (CPI-W)
• No COLA in 2010 and 2011
AARP 10

11. Older Americans Depend
on Social Security
AARP Public Policy Institute tabulation of the 2010 U.S. AARP 11
Bureau of Census Current Population

12. Social Security Helps Keep
Older Americans out of
Poverty
100%
90% Above poverty
80%
47.3 51.6
70% 54.9 55.7
63.2
60% Above poverty
50% because of
Social Security
40%
33.8 30.1 Below poverty
30% 36.2 37.7 20.8
20%
10% 18.9 18.3 16
8.9 6.6
0%
AARP Public Policy Institute tabulation of the March 2010 AARP 12
U.S. Bureau of Census Current Population

13. Social Security is
Important for All Incomes
Low Income Middle Income Upper Income
3% 3%
6%
3% 7%
5%
26% 37%
20%
87% 70% 34%
Social Security Pensions Assets Other
13
Center for Retirement Research; US Bureau of Labor 2009 AARP

14. Worker to Beneficiary Ratio
AARP 14
2010 Annual Report of Social Security Trustees

15. Social Security Trust Funds
Who are the Trustees?
• Sec’y of Treasury
• Sec’y Labor
• Sec’y of Health and Human Services
• Commissioner of Social Security
• Presidential Appointees (2)
What are the Trust Funds?
• Accounts in the U. S Treasury to which FICA
and SECA tax dollars are credited and
benefit payments are debited.
AARP 15

16. Social Security Trust Funds
• Old Age and Survivors
Insurance Trust Fund (OASI)
• Disability Insurance Trust
Fund (DI)
AARP 16

17. Social Security Trust Funds
• Trust Funds track Social Security’s
income and outflow of benefits
• Trust Funds credited with tax
revenue and interest
• Trust Funds debited for benefit
payments and administrative costs
• Trust Funds assets grow when
credits exceed debits.
AARP 17

18. Trust Funds Assets
Trust Funds assets must be
invested in interest bearing
special issue Treasury bonds.
AARP 18

19. Trust Funds Assets
• As of 2010, about $2.6 trillion of
assets in Trust Funds
• Trust Funds assets are part of
gross/total debt
• As Trust Funds redeemed to pay
benefits they become publically held
debt
AARP 19

20. Trust Funds Assets
• Positive Social Security Cash Flow
More Trust Funds debt; Less publically held
debt
Social Security historically had positive cash
flow
• Negative Social Security Cash Flow
Less Trust Funds debt; more publically held
debt
• Costs can ONLY be covered if Trust
Funds has assets AARP 20

21. Social Security's Solvency
FACT
vs.
MYTH
• Social Security is NOT in Crisis.
• Trust Funds invested in Treasuries
and backed by the full faith and
credit of the U.S. Government.
AARP 21

22. Social Security's Solvency
2010 Trustees’ Report
2015 Benefits exceed income
revenue excluding interest
2025 Benefits exceed income
revenue including interest
2036 Trust Funds assets are
exhausted – Social Security
must rely solely on tax
revenue
After Continued reduced benefits
2036 paid AARP 22

23. Key Features of Social
Security Program
• Earned benefit
• Guaranteed life-time benefit protected
from inflation
• Higher the contribution, higher the
benefit
• Progressive benefits
AARP 23

24. Solvency Options:
Revenue Enhancements
• Increase level of earnings subject to
the payroll tax
• Increase payroll tax rate
• Tax salary reduction plans in same
manner as 401(K) plans
AARP 24

25. Solvency Options:
Benefit Adjustments
• Increase the full retirement age
• Adjust benefit formula to decrease
benefits for higher earners
• Change basis for annual COLA
• Means-test to eliminate benefit for
highest incomes
• Longevity indexing of full
retirement age
AARP 25

26. Social Security Campaign
AARP 26

27. Social Security: Keep it Strong
You Earned It. Let’s Protect It.
27