President Franklin Roosevelt signed the Social Security Act into law on August 14, 1935, and created a program that would pay monthly benefits to retired workers starting at age sixty-five or older. The act further established a payroll tax to fund the program, while it required employers to withhold the tax from employee wages.
For the first five years of the program, until 1940, the government actually paid Americans their benefits via a single lump-sum payment. The purpose was to help individuals by giving back some of the money that they had put into the system, and most of those were people who would not be contributing long enough due to age or other work-related reasons. As expected, the amounts paid out weren’t very large, and the first-ever social security check was for just $0.17.
Ida Fuller was the first person to receive a monthly benefit. Her first check was for $22.54. Fuller, who worked as a legal secretary, collected payments until she was one hundred years old. Monthly payments to retired workers have continued since then and have increased to an average of $1,464 per month in January 2019.
Yet it wasn’t until October 1950 that Congress authorized the first cost-of-living adjustment (COLA). It increased payments at the time by 77 percent. The next big change came in 1956 when the Social Security Act was amended to provide benefits to disabled workers fifty to sixty-four years old, as well as disabled adult children.
Four years later, President Dwight Eisenhower signed a law that further amended the disability rules, which permitted the payment of benefits to disabled workers of any age and to their dependents.
Age of Retirement
When President Roosevelt signed the Social Security Act into law, it was meant to provide for the retirement of elderly Americans. Yet, largely forgotten is the fact that Roosevelt was just fifty-three years old when he signed that law, and he passed away at age sixty-three in 1945 and wouldn't have been eligible to receive the benefits.
The federal government was actually rather wily in how the law was written. Life expectancy at birth in 1930 was fifty-eight for men and sixty-two for women, yet as noted the age of retirement was set at sixty-five. The government was essentially counting on the fact that there wouldn’t be many people receiving payments for years or decades to come.
However, a 1961 law allowed workers to begin claiming permanently “reduced” Social Security payments as early as age sixty-two.
Moreover, a 1983 law then raised the full retirement age to sixty-six for most baby boomers and sixty-seven for people born in 1960 or later while it also increased the reduction in monthly payments for people who sign up before their full retirement age. Provisions were further added to increase payments for retirees who delay claiming benefits past their full retirement age up until age seventy.
COLA Increases and Taxes
In July 1975, the first annual automatic COLA, an 8 percent increase, was paid. Before 1975, each COLA required authorization by Congress. Five years later, social security beneficiaries received the highest annual COLA increase ever—14.3 percent. This was notable too as the inflation rate in 1980 was 12.5 percent.
However, the 1980s also saw another significant change to Social Security, when in 1985 benefits became taxable for people who earn above a certain amount.
Now, individuals will pay tax on only 85 percent of their Social Security benefits, based on Internal Revenue Service (IRS) rules, according to the Social Security Administration. But that is only if the individual files a federal tax return as an “individual” and the combined income is between $25,000 and $34,000. In that case, the individual may have to pay income tax on up to 50 percent of their benefits.
For those making more than $34,000, up to 85 percent of the benefits may be taxable; and for couples filing a joint return, and make between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits; while couples making more than $44,000, up to 85 percent the benefits may be taxable.
Even in retirement, there is no way to escape taxes.
Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers and websites. He regularly writes about military small arms, and is the author of several books on military headgear including A Gallery of Military Headdress, which is available on Amazon.com.
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