CHAPTER 1

History of Social Security -
How Social Security Benefits Started

Learning the history of Social Security is important for a complete understanding of the reasons we have our Social Security benefits structure of today.

Let’s start with a definition, then move on to the history of Social Security. Social Security is a form of social insurance that is meant to provide basic protection against financial hardship due to significant events, such as, death, disability and aging.

Early History

We should start in England to provide an understanding on why we may qualify for Social Security benefits. The concept of “Poor Laws” were brought by the early colonist from England.

This idea included taxation to help the destitute. The concept was set up on a local basis, that is, the village or small town would help its own. Later as colonies grew, the process of handling locally became more difficult. The assistance to those in need as a public arrangement DID NOT develop on a wider scale. Even as late as 1915, according to the IRS, public funds only provided up to 25% of the money spent on relief for citizens.

Thomas Payne, later during the Revolutionary War period, proposed the establishment of a public system of economic security. That system called for a way to give a person a start in life by providing a one time payment. The amount given at that time was 15 pounds sterling when that person reached age 21. Additionally, it provided a way to protect against poverty in old age by annual payments. The amount of those payments were 10 pounds sterling to be paid to every person age 50 or older. However, this proposal was never enacted.

© James Steidl - Fotolia.com-reaching-hands

Upon the ending of the Civil War, we began seeing the development of a pension program to help the many widows, orphans and disabled veterans of the War. It was later determined that service-connected disability was not required for the veteran to receive a pension. Any disabled veteran of the Civil War could qualify. Therefore, a veteran qualified if he reached old age, even without a disability. Then by 1910, veterans and surviving widows were receiving benefits. This encouraged many young women to search out their love in the ranks of the Civil War veterans, which they did. The result was payments to the widows of these veterans well past the original intended period which raised some Social Security questions.

Poverty grew dramatically, especially among the elderly, as a result of the Great Depression, A number of states developed some form of old age pension to help, but these programs were not significantly effective.


Enactment

Our political leaders attempted to focus on ways to improve security as our nation grew after the Great Depression. Then on June 8, 1934, Franklin Roosevelt announced his intention to provide a program for the social security of the citizens. That notice changed the history of Social Security as it was later signed into law on August 14, 1935. The main provisions were:

  • Provide for general welfare
  • Provide social insurance program to pay workers age 65 or older after retirement
  • Unemployment insurance
  • Old age assistance
  • Aid to dependent children
  • Grants to states to provide various forms of medical care


Amendments

The history of social security is fluid. Several amendments were added in 1939 which provided for 1) payments to spouses and minor children of a worker and 2) survivor’s benefits paid to a family in the event of premature death of a covered worker. These amendments changed the program to a family based economic security program from a program for retired workers.

By 1950 the Cost of Living Adjustment (“COLA”) was added and later was adjusted periodically by special acts of Congress until 1972 when legislation called for automatic annual adjustments.

In 1954 the Disability Insurance program was added. This eventually allowed payments to disabled workers of any age and to their dependents.

In 1964 a new social insurance program was added that extended health coverage to all Americans age 65 or older, i.e. Medicare.

In 1972 the Social Security Administration assumed responsibility of a program called Supplement Security Income. It was designed to 1) help aged, blind or disabled people who have little or no income, and 2) provide cash to meet basic needs for food, clothes, and shelter. The history of social security continues to change.


Fotolia_13234316_XS_senior_couple_with_computer Conclusion

Today, the end result is a program that provides some Social Security benefits due to old age – for the worker’s retirement, spouse’s benefits, and child’s benefits. It also provides survivor benefits after the death of a worker. Disability Insurance provides benefits to the worker and perhaps to the spouse or child of the disable worker. All of these elements should be considered in your own retirement planning.

We have seen through the history of Social Security that the concept has evolved from that of assisting the destitute and old aged to a retired worker program to a security program for families on a national level. Undoubtedly, it will continue to change and may have an impact on your view of retirement jobs.



Disclaimer: The above statements represent the opinion of the author and individuals should contact the Social Security Administration to gain a full understanding of the benefits for which they may qualify.



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