Social Security

Benefits

The data on beneficiaries reflect Social Security's insurance role. In 2007, the last year for which data are available, close to 50 million people received a benefit check from Social Security. Only about half of these beneficiaries—50.4% to be exact—collected their own retirement benefits. Another 9 million beneficiaries—workers and their families—received disability checks and an additional 6 million survivors of deceased workers received survivorship benefits. The Social Security Administration (SSA) reported in 2009 that the remaining beneficiaries collected some additional benefits, such as a spousal benefit or survivorship benefit.

The insurance value provided by Social Security for families is best illustrated by the number of children and young adults that benefit from the system. Children of retired and disabled workers and surviving children of deceased workers under the age of 18 years qualify for Social Security benefits. Students can receive some benefits until they turn 20 years old. And there is no age limit for disabled adult children who are 18 years and older to receive Social Security benefits. A total of 4.1 million children received benefits in 2008: 3.1 million qualified because of their age; 795,000 qualified because of their disability; and 136,000 received benefits as students. A disproportionate share of children who received benefits—37.1%—were either African American or Hispanic, reflecting the higher incidence of disability and higher mortality rates of minorities.

Benefits paid under Social Security offer a very basic insurance value. For a worker with a lifetime of average earnings who retired at age 66 in 2009—the age for receipt of unreduced retirement benefits—with final earnings of $44,000, the expected Social Security benefits amounted to 40.8% of the worker's final earnings reported by SSA in 2008. Workers and their families are expected to cover additional consumption needs out of their own personal saving.

Monthly Social Security benefit checks tend to be relatively modest. The average monthly retirement check amounted to $1,032 in 2007, the last year for which data are available. This is still higher than the average monthly check of $856 paid out under the disability program and the $922 for the survivors of deceased workers reported in the SSA's Annual Statistical Supplement, 2008.

Revenue

The calculation of Social Security benefits depends on several factors. First and foremost, Social Security benefits are an earned insurance benefit. The level of insurance benefits depends on the earnings up to the point of the initial benefit receipt. Second, a worker has to have contributed for a minimum number of quarters to become eligible for benefits. This minimum is 40 quarters for retirement benefits, as reported by the Social Security Administration in 2008. It is 6 to 20 quarters depending on a worker's age by the time he or [Page 967]she becomes disabled for disability benefits, and it is a maximum of 40 quarters that a worker has had to work before he or she died for his or her family to qualify for survivorship benefits. The number of necessary quarters for survivorship benefits decreases with age. Third, the age of a beneficiary will also play a role, at least for retirement benefits. The age for the receipt of unreduced benefits is scheduled to increase to 67 by 2025, from 66 in 2009. All eligible workers are entitled to collect permanently reduced benefits at age 62. Fourth, benefits typically increase each year with inflation once a beneficiary starts receiving benefits.

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