Social Security is an important social insurance program. We have all been hearing about its possible collapse and lack of funding for some time. Without legislation to reform this system, it has been reported that Social Security, as we know it today, could be depleted sometime in the 2030’s. As a very relevant issue to retirees now and in the future, we thought it might be interesting to take a look at Social Security’s history, structure and future.
The Social Security Administration (SSA) reports that 50 percent of married senior citizens and 70 percent of unmarried seniors count on at least half of their SS to supplement their retirement funds, some relying totally on their checks. Social Security was never meant to totally fund retirement, but Americans have come to rely on it for retirement, disability and survivor benefits. According to the SSA about 63 million Americans received approximately $1 trillion in benefits in 2018.
Historically, “public welfare” in America can be traced back to Colonial times. The colonialists brought their system with them when they came to America, as each community developed “Poor Laws” to collect and distribute money to the poor and needy in their own community. As the colonies grew more complex, local systems became strained and states tried to take over and provide that relief.
America’s precursor to a “social security” program might well have been the Civil War pensions. This program offered something we can recognize as a social program, however, to only one special segment of the American people, even though it was a large segment. Throughout American history limited types of pensions were paid to veterans of various wars, but the Civil War pension was the first pension system developed in America.
After the Civil War, America experienced so much change throughout its history; the Industrial Revolution, the urbanization of America, the disappearance of the “extended” family and a marked increase in life expectancy. Beginning in the mid-1880’s these changes rendered many systems attempting to provide help to the poor and needy increasingly unworkable. Small rural communities were disappearing and cities were developing at an extraordinary rate. In 1920 for the first time in history, there were more people living in cities than on farms. It wasn’t until the Great Depression that the Federal Government stepped in to lay a foundation for greater financial security across the country.
On August 14, 1935, President Franklin D. Roosevelt signed into law the Social Security Act. The President said, “The SSA offers to all our citizens a workable and working method of meeting urgent present needs . . .” – and in 1939 The SS Administration reported, “It is impossible under any social insurance system to provide ideal security for every individual. The practical objective is to pay benefits that provide a minimum degree of social security – as a basis upon which the worker, through his own efforts, will have a better chance to provide adequately for his individual security”.
Next week we’ll look at the structure, amendments and changes to Social Security.
Have a great weekend!