The Social Security Retirement Act was passed in 1935. Originally enacted and government funded in order to help retired workers following the economic turmoil following the great depression. Public payments (taxes) into the system did not begin until 1937.
Times have changed. More and more women have joined the workforce either by choice or from necessity than lawmakers planned for in 1935. This means that there are more women drawing retirement benefits than originally anticipated. This also means more working women are paying into the program, but other factors have kept this from correcting the problems created by the influx of female workers.
The reality is, that many female workers earn lower wages and work for less years on average, many taking time off to raise families. Not only does this mean that a majority of women are not at the maximum taxable threshold, but also that they are drawing out more in retirement benefits than they paid in.
A secondary problem is that women tend to save less for retirement and are more reliant on SS retirement benefits. This coupled with the fact that their benefits are typically lower than their male counterparts’ means many women simply do not have enough to live on if they retire.
Since the beginning of the SS program, tax payers have provided 96% of the money used to fund both SS Retirement and SS Disability. The tax rate has changed 8 times since SSA’s inception. In 1935, workers and employers paid only 2% total into the SS program. In 2014, 12.4% was paid into SS in the form of FICA or (Self employment SECA taxes). 6.2% from the worker and 6.2% from the employer.
Another way SS has attempted to keep up with the growing number of female workers, as well as with inflation, is to raise the maximum income amount that can be taxed. In 1935, the first $3,000 of earnings was subject to the tax rate above. This amount has been increased 4 times since then. In 2014, the taxable income amount has risen to $117,000.
In 1935, 2% of the first $3,000 of a worker’s income went into SSA. ($60) By contrast, in 2014, 12.4% of the first $117,000 is paid in. ($14,508). On its face, the increase in amount being paid into the system per worker would appear to be adequate to keep the programs in the black.
SSA has tried to address this problem, but more is still needed. One way is to allow a spouse to draw 50% of their spouse’s retirement. The problems are that you had to be married to get this and that 50% is rarely enough to live on, especially if you outlive your spouse and have only this income. A potential solution is giving large increases in living adjustments to compensate for the lower amounts.
Another option being considered is to allow women who chose to stay home and raise families care giver credits that count towards their own retirement. The problem with this option is funding. Where will this additional money come from?
The good news is that SSA is acknowledging, and attempting to address this problem. The bad news is that balancing the need with the taxes to workers and the future solvency of the SS programs isn’t making it easy to remedy.