Opinion: Social Security—Strong and More Important Than Ever

Rancho Bernardo's Charlie Williams explains why, as Social Security turns 77, it has become more important than ever.

By Charlie Williams

Social Security celebrated its 77th Birthday on August 14. This year as in past years we once again find Social Security healthy and going strong much like most senior citizens today who wear their age so well, thanks in great part to the economic protection of Social Security in their retirement years. 

American workers  have come to rely on Social Security more today than ever before and for good reason. Study after study has shown that most workers are not financially ready for retirement. That is especially true when relying on their company to provide them with a retirement pension as company pensions are disappearing at an alarming rate. Efforts at saving enough for retirement have failed for far too many and they are left to rely on Social Security as their main source of retirement income. 

Teresa Ghilarducci reports in a July 21 article in the New York Times that "75 percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts." Not very much for seniors who are expected to live well into their 70s, many into their 80s, 90s and even 100’s. An Aug. 7 article appearing in the U-T San Diego business section by Barbara Bry and Neil Senturia looks into overall investment returns over the last 10 years and reports that odds were long, and returns were small even for top investors, noting that, "To make it into the top 25 percent, you needed to return only 92 cents of every dollar invested with your firm." That is a big ouch for most all investors much less the average investor. Their findings illustrate the difficulty in making it in the investment world over these past 10 years. And it is quite clear $30,000 in savings will not ensure anything near a comfortable retirement. Faced with that fact, Social Security benefits become more important than ever and the crucial need for workers and retirees alike to better educate themselves on how crucial Social Security has become to our economic well-being not only in retirement but all throughout our lives.

As we celebrate this 77th year of Social Security, we discover benefits have grown quite a bit since 1987 while company retirement plans and investment prospects have failed to keep up with needed income for most people in their retirement years. Many company retirement plans have disappeared though some were replaced with a 401(k)-type plan which I will discuss later on in this article. While pension benefits have shrunk or disappeared over this time span, Social Security benefits have actually grown, giving a foundation of income for retirees they would otherwise not have.

Using the Social Security Average Indexed Monthly Earnings (AIME) Social Security monthly benefits payable in 1987 for a person with an average monthly income of  $2,009 at age 65 received a monthly benefit of only $789. But by the year 2012 at that same amount of average earnings, retirees receive $1,618 in monthly Social Security benefits. (Source: Automatic Determinations Workers with Maximum-Taxable Earnings). The average Social Security benefit at the beginning of the year 2012 was $1,230.

Simple math tells us those paying into Social Security do much better in their retirement income than those relying on investments in the stock market. It is equally obvious that a retiree with the average savings of only $30,000 will quickly run out of their retirement savings. On the other hand their Social Security benefits are guaranteed for the life of the retiree. Social Security was never intended to be a person's total income in their retirement years. Instead that was the promise of the 401(k) made in 1978 (Revenue Act of 1978) when Congress amended the Internal Revenue Code later called section 401(k), But the promise Congress gave us at the time has never materialized. One reason is due in part to low investment returns and heavy stock market losses since 401(k)’s inception.

The latest and most heavy losses occurred in 2007-8 when the economy tanked. Far too many retirees banked on their 401(k) and other investments as their major source of retirement income only to lose their retirement nest egg in the stock market and more often than not lose their homes to bank foreclosure, foreclosed on by the very banks who caused the economic collapse.

Not too long ago we were taught about using the three-legged stool for retirement planning: 1.) Social Security, 2.) pension and 3.) savings. Unfortunately, two of the legs of the stool have been broken or severely damaged leaving only Social Security intact.

While two legs of the retirement stool have been damaged, monthly payments of Social Security benefits have never stopped nor even slowed down. Nor have Social Security benefits ever been reduced even though the economy tanked and we found ourselves in the worst recession since the Depression era which helped in getting Congress to pass the Social Security Act in 1935

One might think the Social Security Trust Fund would have tanked in the current economic downturn along with millions of workers' jobs who were paying into the trust fund. Fact is monthly benefits payments under Social Security have actually increased during this economic downturn. Yes, thanks to the Cost of Living Allowance (COLA), monthly benefits have increased as recently as this year. Looking at how well Social Security has done over these past 77 years,  a good case can be made to put more money into the trust fund so we would be better able to convince Congress to increase monthly benefits payments for future retirees and relax eligibility rules. 

As we celebrate Social Security’s birthday, let's also remember how well Social Security serves many millions of recipients, not only retirees but widowed children and the disabled, all of whom rely on Social Security benefits as a crucial part of their total income. The Social Security Trustees have most recently assured us the program is solvent with $2.7 trillion in surplus reserves, enough to pay full benefits to all current and future retirees for the next two decades.

So, let's celebrate the one retirement program we have come to trust over these past 77 years. Our trust in the program is reassured by the fund trustees who tell us the Trust Fund will remain strong and serve Americans for many years to come. Yes, HAPPY BIRTHDAY SOCIAL SECURITY, Happy Birthday indeed.

Charlie Williams is Chairman of the Field Mobilization Committee for the Alliance for Retired Americans and former Midwest States Political Director for the Machinists Union.

vivian blackstone August 18, 2012 at 03:42 PM
hooray and Happy Birthday, aren't we all lucky that it's our birthday celebration also. only hope the monies in SS will be safe from greedy opticians who see it as a way out for their lack of ingenuity or foresight. Thanks Charlie, for re,ending us of how lucky we seniors, Americans, are. Vivian
Erik Windsor August 18, 2012 at 05:16 PM
Charlie, I enjoyed reading your article. I agree and appreciate all you conveyed. I am always intrigued when reminded , as you did, about how the government ( I am sure with the push of big business) created the 401k . Then duped most of middle america to relinquish there hold on more defined retirement plans from their employers. Only to make the investment banks richer and richer even when investors took losses that devastated their retirement nest eggs. Now as you pointed out we have an ever growing and aging retiree group. Something else of note is that their are many San Diegans (San Diego City Employees) who again were duped by politicians into giving up Social Security for the promise of retiree health care from the city of San Diego. Now that has been ripped from those people and families who will be left without a safety net. To add further insult those very same employees who may have contributed at some other time in their lives to Social Security are still not eligible to claim Social Security due to being part of one of the last remaining Defined retirement plans. Why do I add this to your already well written article? I think it is important to remind people or point out that sometimes what sounds to good to be true; well you know the rest. Their is a current assault on many Americans to relinquish those few pension plans out there, pushing more people into the poor house and adding further burden to Social Security. The further burdens may Kill off SSN.
guy cargulia August 18, 2012 at 08:28 PM
Hi Charlie Williams: Social Security is one of the most , if not the most, successful government programs. It needs to be strengthen so it came remain so. Great article, keep up the good work. Guy Cargulia
Charlie Williams August 18, 2012 at 08:45 PM
A well written response to my article Erik, thank you. As you may have noted, I have written before about the San Diego workers being duped into giving up their Social Security. When San Diego workers were suckered into giving up their Social Security I was still working in Chicago. I near fell out of my chair while reading the Wall Street Journal article reporting San Diego workers had given up their Social Security "for a political promise the city fathers never intended to keep". Now voters are having the wool pulled over their eyes with Prop B and other anti worker props that were just recently passed. Social Security is sound even with all the problems of high unemployment and slow job growth. That can't honestly be said about 4-01(k) investments. Social Security will remain sound at least until the year 2033. After that there will still be enough in reserves to pay 77 percent of benefits for the next 75 years even if additional funding is not forthcoming. With additional funding by having the cap eliminated for example will insure full Social Security benefits throughout all our lifetimes. A good investment indeed. Those who willingly place their economic future in the investment world or in a 401 (k) are far more at risk than are those who invest in Social Security. One need look no further than the past 30 years to understand why an honest economists would be expected to make that claim.
Tony Padilla August 18, 2012 at 08:52 PM
Charlie, congratulations in the way you outlined the blessings of a Senior having as an economic backup for his\hers retirement under Social Security. What a great success story that allows Seniors to live with dignity allowing them to enjoy a minimum life style in comfort. Like you, I said it before, it is indeed a Happy 77th Birthday of a success story that has lasted 77 years. Those who advocate changes to privatize it do not deserve to be in public office and I hope that when the time comes to voice their concern it is to vote to continue this great benefit for the most vulnerable citizens in our great nation. Likewise I hope that voters remember what is being proposed for those Seniors under Medicare. Do not let anyone full you as to think the opposition suddenly wants to save this great programs.
Sean Agnew August 21, 2012 at 04:04 PM
During the previous decade I watch my 401k go down even as I made contributions. It has yet to show any upward trend. Thanks to this article I have even more respect for Social Security.


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