Continuing our countdown of the top ten facts about Social Security in honor of its 75th anniversary this weekend, here are today’s two:
Social Security provides a guaranteed, progressive benefit that keeps up with increases in the cost of living. In recent years, fewer employers have been offering defined-benefit pension plans, which guarantee a certain benefit level upon retirement, and more employers are offering defined-contribution plans, which pay a benefit based on a worker’s contributions and the rate of return they earn. For most workers, Social Security will be their only source of guaranteed retirement income that is not subject to investment risk or financial market fluctuations and that will keep up with inflation no matter how long they live.
In the chart below, you can see how Social Security benefits are progressive: they represent a higher proportion of a worker’s previous earnings for workers at lower earnings levels.
Social Security provides a foundation of retirement protection for nearly every American, and its benefits are not means-tested. Almost all workers participate in Social Security by making payroll tax contributions, and almost all elderly people receive Social Security benefits. The near-universality of Social Security brings many important advantages: