History of Social Security and its Evolution
Nov 14, 2022
Blueprint Income Team
The want for economic security is no new trend. We’ve laid out the evolution of Social Security and how it’s developed into the program it is today.
- Among several revisions to the Social Security act, additions such as Survivor and Dependent Benefits enabled more retired Americans to receive Social Security
- Revisions to Social Security continue to occur to keep up with the changing economy
Economic security is a societal concern dating as far back as ancient Greece and medieval Europe, with the ever present threats of unemployment, illness, disability, death, and old age. In medieval Europe, economic security conjured up thoughts of land and serfdom. But as societies grew more and more complex, the need for formal organizations to protect and provide financial security grew. From guilds to friendly societies to fraternal organizations, we began, in the 1500s, to see the practice of providing actuarially-based life insurance.
From there, the idea of government responsibility in providing economic security and welfare grew. Many of these implementations reflected our present Social Security system, such as Thomas Paine’s Agrarian Justice that called for a system that included annual benefits of 10 pounds sterling paid to every person age 50 and older in order to protect against poverty in old-age.
While Civil War pensions and company pensions came close to shadowing our current system, it wasn’t until late 19th century Europe that the idea of Social Security in a modern industrialized world truly come to be. Even later, President Franklin Delano Roosevelt passed the Social Security Act in 1934 as a response to the Great Depression. This new act, among other provisions, established a social insurance program specifically designed to pay a continuing income to retired workers aged 65 and older. Back then, the average lump sum payment upon retirement was merely $58.06.
If the drastic jump in retirement payments since 1934 didn’t tip you off, there’s been a number of necessary amendments made to the Social Security Act since its implementation to keep up with the ever changing economy. Here are some highlights:
- 1939 Amendments: Two new categories are introduced: (1) Dependent Benefits given to the spouse and minor children of a retired worker, and (2) Survivors Benefits paid to the family in the event of premature death.
- 1950s Amendments: Benefits are raised for the first time, a necessary change to the still very young program, and positioned the system to develop into the virtually universal coverage it has today. Also legislated was (1) the first cost of living adjustment (COLA), an annual increase to Social Security benefits to account for the effects of inflation on fixed incomes, and (2) a disability insurance program.
- 1960s Amendments: Two big changes occur: (1) The age at which men become eligible for retirement benefits is lowered to age 62; (2) The passage of Medicare, which extended health coverage to Social Security beneficiaries age 65 or older.
- 1970s Amendments: The ‘70s was the decade of automatic adjustments in benefits, thanks to two key changes: (1) A law changed to provide automatic annual COLAs based on the annual increase in consumer prices, rather than leaving people to wait on a special act of Congress for a benefit increase, and (2) wage-indexing of the initial benefit amount is introduced to ensure benefits keep up with standards of living.
- 1980s Amendments: This decade marked big changes to the disability program.
Social Security has and continues to be an ongoing, evolving system, and it’s probable that that’ll continue to be the case moving forward.
Blueprint Income Team
We are a team of finance, insurance, and actuarial professionals working to make it easier for everyone to achieve a steady and comfortable retirement. We write about annuities (the good and the bad) and provide strategies to help Americans prepare for retirement.