Social Security: How many people were expected to receive benefits?

A friend of mine posted this on Facebook: “Interesting statistic – in 1930 the average life expectancy in the US was 58 for men and 62 for women. That’s amazing! Now we feel at those ages we have a lot of living left to do!”

That led to a conversation on Social Security and this question: “The Stat posted was for 1930. How can it be 6 years later social security established retirement age at 65? If the average life span was under 65?”

So of course I had to get out my trusty dusty stats.

Though the life expectancy at birth in 1930 was only 58/62 (the chart I’m looking at says 59/63 for 1929-1931, FYI, not much different), that included a high infant mortality rate. Looking at age 20 (entering the workforce), the life expectancy was another roughly 47 years (age 67/68). So Social Security was designed in 1935 with the intent that it would only kick in at end of life. Which fits the goal of Social Security: protect the most vulnerable elderly. (The modern idea of retiring before you had to physically stop working was only gradually percolating through the country at the time.)

However, the most relevant life expectancy number for the Social Security Board was at 65, which was roughly another 13 years (age 77/78). Among these, the ones who were starting to outlive their cohort, were the vulnerable elderly, and the older they got, the more vulnerable they became. At that moment in time (1929-1931), actuaries estimated that 53% of the men and 60% of the women had survived to 65. (These numbers were for whites, by the way. The numbers for blacks were not that high.) Check out the growth of the “number dying” column before and after that age, especially for the men. Then look at the “number alive” column. Only 42% of 70-year-olds were expected to still be alive, and less than 30% of 75-year-olds.

Now, of course, the numbers are a lot higher. As of 2014, the number of people surviving to 65 was 84% overall. Social Security was never meant to send benefits to that much of society. Receive taxes from, yes. Pay out to, no. To get an equivalent survival rate in 2014, the retirement age would have to be over 80. And then there are the inherent structural issues, but that’s a topic for another day (or read on some of them here).


  1. Pingback: WHY THE PONZI SCHEME IS BROKEN:  Social Security: How many people were expected to receive benefits… - Novus Vero

  2. John C. Randolph

    Interesting essay, but I must reject the claim that the goal of Social Security was ever to protect the vulnerable elderly. SS, like the rest of FDR’s meddling in the economy, was never anything more than a pretext to impose yet another tax on us, and the routine looting of the “trust fund” from day one proves this.

    If any private organization spent its pension fund on its own bonds the way that the US government does, someone would be doing time for fraud.


    1. MiddleAmerican

      Spot on. Also, don’t forget the govt has increased the tax (as % of income) 500% since 1930. Today, if you’re an above avg earner, you’ll barely get your money back, even if you live to only an average age. And, that’s before they tax away 20-30% of your benefits after you receive them.

    2. Dawn Smit

      Well, the high-sounding rhetoric was a cover for a blatant power grab with a dollop of self-righteousness, so I’m OK with adding a modifier. Ostensible goal of Social Security? Publicly stated goal?

  3. Will

    Thanks for your posts on Social Security. I knew about the 2034 date, when supposedly the trust funds will run out. But I had not thought about problems beginning possibly as early as 2028 or 2029.

    I suppose one could make a very good case for filing for SS benefits as early as possible rather than waiting until age 70 and receiving a higher monthly benefit. If one could get ten years of age-reduced benefits that could be better than getting the higher benefits for only two or three years before the trust funds run out.

    Am I making any sense? Thanks again.

    1. Dawn Smit

      I’ve said something very similar to my friends. The catch is that Social Security benefits are taxed if you make above a certain threshold, and those in the particular age group that might benefit most from this should probably continue to work to maximize non-SS retirement funds. Which means that the lower benefits will be further reduced by a person’s marginal tax rate. Which means that each person or couple should run the numbers themselves because the answers are going to vary. Widely.

      Now if a person can take those reduced benefits and invest them in stocks, bonds, precious metals, real estate, etc., he could very well end up better off regardless. With the understanding that EVERYTHING is going to be up in the air for a while.

    2. DEEBEE

      Any analysis of SS that talks about “taking less money than sending out” (2016 or some such date0) or “having no money left” (2034or some such date) assumes a “lock box” model (hat tip Al Gore). As mentioned there has never been such a distinction of politicians, unless the reason to “fix” it. Which usually means more taxes and less benefits.

      My view is that politicians will let the issue fester, till a goodly portion of the boomers have died and no longer scare politicians. Back of the envelope calculation would be assuming when the middle of this cohort dies — people Born in 1950 — take your pick. Most should be gone by 2040.

      1. richard40

        I would put the middle of the boomer cohort at about 1954. With a range from 1946-1962 before the birthrate started to significantly fall. Assume most will die by an average age of 90, that would place a limit of 2044 when about 50% of them are dead.

  4. John Jamison

    The trust fund has run out. SS starting paying out more than it was collecting in October 2009. When we talk about the trust fund, what we mean is the IOUs for the money taken by the fed government over the years for which SS that the fed government is to pay back. The fed government is paying it back on paper by borrowing money. So the debt owed to SS is now being translated into debt by the fed government that is now over $21 trillion. The IOUs allegedly run out in 2033/23, but likely sooner as people live longer. SS is a Ponzi scheme and the reason it has not collapsed yet is that the fed government can borrow to cover what it promised–at least for now. The reality is if you are under say 57, and you saved for retirement, you will likely not receive SS as it will be means tested by the mid- to end of the 2020’s. The irony, if a private individual set up SS and ran it like the federal government, the federal government through the SEC or DOJ would have you arrested and thrown in jail as it would be viewed as a crime by that same federal government.

  5. JJ

    The myth of looting the trust fund needs to die. There is a trust fund that has always been invested in government securities. The government already spent the money. They put the payments on those securities in the regular budget. Social Security always gets those payments either from regular tax collections, or from selling more federal securities. The balance of the trust is a different matter and the fundamental flaw is that more people are going to be taking out than paying in. That is the point where Ponzi schemes always fail.

  6. Ken

    “Which fits the goal of Social Security: protect the most vulnerable elderly”

    That was NEVER the idea. If it was, the structure of social security would have been radically different, part of which would be means testing. Guess what’s not in social security’s structure.

    Social security was designed by FDR to buy votes from the elderly, the group with the highest rate of voting, using money stolen from young workers, the group with the lowest rate of voting. Any who supports social security supports one of the most overt corruption of American politics in history.

    1. Dawn Smit

      I agree with you about FDR’s vote buying, but for obvious reasons that’s not how he sold it to the public. “It’s social insurance. Guaranteed retirement for everyone! Think of the elderly right now sleeping in the streets because they can’t find a job and have no income!” (It’s probably even more accurate to call the Social Security Act an unemployment law than a retirement law, but that requires explanation.) Means testing doesn’t fit that perception. However, I can’t find anything on the idea of means testing in the 1930s, so I don’t know what was said either way. Did they even consider it, or were they satisfied with skewing benefits toward those with lower income? If you know of any good articles/papers/books on this, Ken, please comment with them. I’d greatly appreciate it.

      1. Ken

        “However, I can’t find anything on the idea of means testing in the 1930s”

        That’s the point. It wasn’t discussed, so the point of social security wasn’t to “protect the most vulnerable elderly”. It was to enrich ALL elderly at the expense of the working youth.

        1. Dawn Smit

          Or means testing may not have yet been even a glimmer in some finance guy’s eye. That’s what I don’t know.

          Though even if the stated goal was to protect the most vulnerable elderly, one of the underlying goals was certainly vote buying. We don’t disagree on that. After all, we know the politicians were lying; they opened their mouths.

  7. Micha Elyi

    Black females outlive white men. The shocking gap isn’t between white and black but between females and men. When do men get equality of life expectancy?

  8. Jimbino

    It appears that the retirement age for qualifying for SS benefits has from the beginning been set just high enough to benefit white males and females and screw Black males, who are expected to have shorter lives. Now that Black males are living, on average, to 69, the age set by SS for retirement is gradually rising.

    I long ago calculated that, if given the chance as a youth to divert my compulsory SS contributions into the S&P 500 Index, I would at age 67 have been worth some $7,000,000. A major part of the problem is that SS benefits go to the disabled, widows, children and even ex-wives of a living or dead SS beneficiary, whether working or not, leaving little on the table for the person who has worked and contributed for 40+ years.

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