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This past August marked the 89th anniversary of Social Security and it’s a good time to reflect on its profound impact on American society since its creation in 1935. Signed into law during the Great Depression, Social Security emerged as a foundation of hope and stability for millions of Americans facing economic uncertainty. Today, over 65 million Americans receive the money they’ve earned over a lifetime of hard work.
Economic security
Social Security was born out of a commitment to provide a measure of income security for citizens who, through no fault of their own, found themselves without income as they aged or fell on hard times. The original idea was simple yet groundbreaking: workers contribute a portion of their earnings during their working years, and in return, they receive guaranteed income upon retirement.
This system has not only endured but has expanded over the decades. What started as strictly a retirement program now includes disability benefits and survivor benefits for families of deceased workers. The program now also has automatic cost-of-living adjustments to help millions of older Americans keep pace with inflation. These changes have ensured that Social Security meets the evolving needs of American society.
Hoosier lives
The impact of Social Security cannot be overstated. For millions of retirees, it provides reliable income that allows them to live with dignity and independence as they age.
Here in Indiana, more than one in five Indiana residents— 1,382,024 people— receive Social Security benefits. These payments inject more than $24.3 billion into the state’s economy every year. Additionally, it lifted 304,000 Hoosiers 65 or older out of poverty from 2018 through 2020.
Your money, your future
It’s because of the program’s importance that AARP Indiana recently hosted “Your Money, Your Future: Social Security and Retirement Across All Generations.”
This virtual event brought together a panel of experts who provided insights on advocacy, civics, and retirement savings. New York Times bestselling author John Green also joined to express his optimism about tackling the challenges facing Social Security and how Hoosiers can raise their voice to their leaders about the issues that matter to them the most.
Challenges Ahead
Social Security is paid for by dedicated payroll taxes and the interest on those contributions that have built up in the Security Trust Funds. Before 2021, Social Security collected more in taxes and interest than it paid out, so it built up reserves to support the retirement of the “Baby Boomer” generation. Today those reserves are used to supplement incoming payroll tax income, but the trust funds will face a shortfall in 2035 according to current estimates.
The shortfall is primarily caused by lower birth rates (meaning fewer workers paying in) and a growing population of retirees. By 2035, Social Security is still projected to be able to pay 80% of benefits, but a cut of 20% — an average of over $4,000 a year — would hurt both individuals and communities.
Before the trust funds run out of money, Congress can decide to cover the shortfall by raising taxes, cutting benefits or coming up with additional funding sources.
Looking Ahead
Through decades of economic upheaval and social change, Social Security has remained a steadfast source of income for millions of Americans, representing our nation’s commitment to ensuring economic security.
Looking ahead, it is incumbent upon us to protect and save Social Security for both current and future generations. This will require thoughtful policies that preserve its core principles of fairness and sustainability while addressing the challenges of a rapidly changing world.
But Social Security shouldn’t stand alone when it comes to helping Hoosiers secure their financial future. The average Social Security retirement benefit is only about $1,600 a month, which means most people will need additional resources.
It’s why Indiana needs to look at policies that will make it easier for workers to save and allow them to build their own economic security.
About 43% of Indiana private sector workers ages 18 to 64 in 2020 were employed by businesses that do not offer any type of retirement plan. That 43% includes workers at all levels of earnings, education, and backgrounds. All of them would benefit from the ability to use payroll deduction to save for retirement.
So, let’s encourage our leaders to reaffirm the commitment to Social Security as well as recognize the profound impact that giving Hoosiers options to boost their retirement savings will have on their lives and the lives of their families.
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