Congressman Sander Levin

FAQ about Social Security

• How many people are covered by Social Security? How much is the average benefit?

  About 55 million people receive monthly benefits from Social Security, or 1 out of every 4 households. Over 90 percent of seniors receive Social Security benefits. The current average social security benefit for a retired worker is $1,160 a month. As of June 2008, the average benefit for a retired worker was $1084 a month. In addition to providing retirement benefits, Social Security is also a crucial life and disability insurance program.

• How does Social Security work?

  Workers and their employers pay into the Social Security Trust Fund through payroll taxes (FICA taxes) and earn guaranteed monthly benefits that are payable to them when they retire or become disabled. In the event that a covered worker dies, benefits are paid to their surviving spouse and children. Social Security benefits last as long as a retiree lives and are annually adjusted to keep up with inflation.

• What is the Social Security cost-of-living adjustment (COLA) and how is it calculated?

  The Social Security COLA is the amount added to a beneficiary's check each year to account for inflation. The 2009 COLA was 5.8 percent, and went into effect in January 2009. The COLA is calculated by comparing the price of consumer goods from one year to the next, based on Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
  
  It appears likely that there will not be a COLA for 2010. The reason for this is that prices today are lower than they were a year ago. However, seniors will continue to receive the 5.8% increase from 2008, even though prices are lower today than at the end of 2008.

• What is the Social Security Trust Fund?

  The Social Security Trust Fund is a financial account in the U.S. Treasury. Social Security taxes are deposited into this account, and Social Security benefits are paid from it. Also, the Trust Fund holds any funds not needed in the current year to pay benefits and invests them in interest-bearing Treasury bonds that are guaranteed by the U.S. Government.

• Is Social Security really going bankrupt as some have claimed?

  No. As has been the case for many years, the amount of revenue received by the Social Security Trust Fund from taxes and interest is larger than the cost of paying benefits. According to the most recent projection of the Social Security Trustees, Social Security is projected to run annual surpluses until 2016. Starting in about 2016, Social Security will begin redeeming the Treasury bonds held in its reserves. It will continue doing so until about 2037; even after that, the payroll taxes coming into Social Security will still be sufficient to pay 75 percent of currently expected benefits. Congress will be able to take action well before 2037 to close the remaining gap.

• Are Members of Congress paying Social Security taxes?

  Every Member of Congress is required to participate in Social Security, without exception.

(Updated October 19, 2009)