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The amount you get in Social Security retirement benefits is based on your earnings history and when you start to collect, factors I examine closely in Chapters 2 and 3. The average retirement benefit is currently about $16,200 per year, and the maximum benefit is more than $32,000 if you claim benefits at full retirement age. You can increase your benefits by taking them after your full retirement age, up to 70, and you reduce them by taking them earlier (typically, as early as 62).

The survivor’s benefit of Social Security is really a life-insurance policy that has been valued at $476,000 for a 30-year-old worker who’s married with two children and has a median salary. The long-term disability protections are valued at $329,000 in coverage for that same family.

Social Security combines other distinctive features that you usually don’t find all in one place. These traits are worth keeping in mind when you’re trying to get a handle on what the program is worth to you:

❯❯ Benefits are earned. After you meet the requirements for eligibility – generally ten years of earnings for retirement, but less than that for certain protections such as disability – you’ve established your right to a guaranteed benefit, which may also extend to your dependents.

❯❯ Benefits are portable. You can change jobs with no penalty, unlike traditional pensions. Your benefits reflect earnings in various places of employment during your working life. They aren’t typically reduced when you change jobs, because most jobs are covered. (Exceptions include most federal employees hired before 1984, various state and local government workers, and many railroad employees.)

❯❯ Benefit levels are guaranteed. Unlike 401(k)s, for example, Social Security benefits are paid under legal formulas and don’t rise or fall based on your luck with investments, the fortunes of your employer, the direction of interest rates, or other forces over which you have no control.

❯❯ Benefits are universal. Social Security covers the rich, the poor, and – most of all – the middle class. Social Security is a kind of social insurance for the benefit of individuals and society. This makes it very different from a welfare program.

❯❯ Benefits are protected against inflation. Private pensions generally don’t have this feature. But without such protection, rising prices can take a huge toll on fixed income, one that adds up the longer you live.

SOCIAL SECURITY GROWS UP: SOME KEY DEVELOPMENTS

Since President Franklin D. Roosevelt signed Social Security into law in 1935, the program has evolved. Here are some key milestones:

1939: Congress added benefits for retirees’ spouses and minor children, as well as dependents of workers who die.

1950: Coverage was extended to farm workers, domestic workers (such as housekeepers and gardeners), employees of nonprofits, and self-employed nonprofessionals.

1954: Coverage was extended to self-employed farmers and certain professionals, such as accountants, architects, and engineers.

1956: Benefits were added for disabled workers ages 50 to 64 and adult disabled children of workers who earned benefits. Social Security introduced early retirement benefits for women only.

1960: Benefits were added for dependents of disabled workers.

1961: Men were given the option of early retirement benefits, five years after this choice was granted to women.

1965: Congress approved Medicare, a program of federal health insurance for people 65 and older, long sought by advocates of Social Security and social insurance.

1972: Congress approved annual cost-of-living increases for Social Security, linked to the rise in consumer prices. (It had previously approved some benefit hikes on an ad hoc basis.)

1977: Congress approved wage indexing, which adjusts retirement benefits upward to make sure that they reflect the long-term increase in wages that took place during a worker’s lifetime.

1983: Congress agreed to gradually raise the age for full retirement benefits from its traditional level of 65 to 67. That increase is still being phased in. The full retirement age has reached 66 for people born between 1943 and 1954 and will gradually move up to 67 for people born 1960 or later. The 1983 law also introduced taxation of Social Security benefits for higher-income retirees, a shift that is causing growing numbers of people to pay income taxes on part of their Social Security income.

2014: The Social Security Administration began to process and approve some claims for benefits related to same-sex marriage, including claims for spousal and survivor benefits in states that recognize such unions as legal. The new policy followed a Supreme Court ruling in 2013 that Section 3 of the Defense of Marriage Act was unconstitutional.