The Social Security Administration hosted a webinar for 20-somethings yesterday about what Social Security is doing for young people. The program, entitled “Social Security 101: What’s in it for me?”, aimed to explain to workers under 30 what the 4.2 percent of their paychecks that are being withheld as FICA and OASDI taxes in 2011 are doing for them. Here are the services the Social Security program is providing to young workers.
Disability insurance. If you become injured or develop a medical condition that renders you unable to work, you may be eligible for disability payments from the SSA after 6 months. “Almost 3 in 10 of today’s 20-year-olds will become disabled before age 67,” says Brian Simpson, a Social Security public affairs specialist in Raleigh, N.C. who hosted the seminar. “If that happens, Social Security pays money to workers and their families.” Young people who have worked and paid Social Security taxes for as few as 2 years can be eligible for disability payments.
Survivor’s insurance. Many members of generation Y have already begun to start families. If you should die and leave behind children under age 18, your children and a spouse caring for your children both may qualify for monthly payments, up to certain annual limits. “Every single day Social Security pays money to the spouse of a worker and their children if the worker dies, even young workers like you,” says Simpson. The SSA estimates that about 1 in 7 people currently age 20 will die before age 67. Your spouse or minor child may also be eligible for a one-time death benefit.
[Visit the U.S. News Retirement site for more planning ideas and advice.]
Help supporting your parents. When parents and grandparents get a Social Security payment, they are less likely to need help from younger family members to support themselves. It would be difficult for most young people to send their parents $1,177 per month, which is the average monthly Social Security benefit a retired worker received at the beginning of 2011. And if you do plan to care for your parents or grandparents, it’s nice to have that payment coming into the household to help with expenses.
A retirement payout. The amount you will receive in retirement is calculated based on the monthly average of your highest 35 earnings years in the workforce. Workers born in 1960 or later can collect the full amount they are entitled to at age 67. If you collect between ages 62 and 66 your benefit will be reduced because you will receive the payments spread over more years. If you further delay your start date you will get an even higher payout up until age 70.
The payments will continue for the rest of your life, no matter how long you live. “Today’s younger workers can expect to spend about 20 years in retirement,” says Simpson. This guaranteed stream of income prevents you from completely running out of money and becoming dependent on relatives if you happen to live longer than expected. The SSA says that retirement payments replace about 40 percent of preretirement earnings for the typical worker. Any amount you need above that must come from pensions, investments, savings, or other sources of retirement income.
Many 20-somethings attending the webinar expressed concerns that Social Security would not be around to make payments when current young people are ready to retire. The Social Security trust fund is currently projected to have enough resources to provide payments until the end of 2037. After that, unless changes are made to the program, there will only be sufficient resources to pay just over 75 percent of scheduled benefits. “Seventy-five percent after the year 2037 is not good, but it is not nothing either,” says Simpson. “There will still be millions and millions and millions of people working and paying payroll taxes…Social Security will not be broke.”