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Business & Tech

3 Odd Stories about Social Security

The ins and outs of Social Security, from Mansfield's Steve Davis.

Social Security touches the lives of almost every American family.  It not only provides income to retirees, but also to workers who become disabled, and families in which a spouse or parent dies.  But it wasn’t always this way.  Here’s what President Franklin Roosevelt said in a radio broadcast on the third anniversary of the Social Security Act in 1938, just a few years after the Great Depression and stock market crash left many older American penniless.

“Long before the economic blight of the depression descended on the Nation, millions of our people were living in wastelands of want and fear. Men and women too old and infirm to work either depended on those who had but little to share, or spent their remaining years within the walls of a poorhouse . . .”


It was FDR who signed the Social Security Act into law in 1935.  It was created as a self-funding program paid through payroll taxes paid by both the employee and his employer (currently 6.2% of income up to $110,100).  

Don’t spend it all in one place, Ernest Ackerman!  
In the first few years, Social Security benefits were made as a single, lump-sum payment -- the idea was to provide some "payback" to those people who contributed to the program but would not participate long enough to be vested for monthly benefits.
Ernest Ackerman was the very first recipient of Social Security benefits.  Ackerman worked in Cleveland as a streetcar motorman and retired the day after the Social Security program began.  When he received his last paycheck, he found that his employer had withheld a nickel from his pay and consequently, he was eligible for benefits.  According to the Social Security Administration, Ernest Ackerman received a whopping lump-sum payment of 17 cents.


Ida May Fuller’s 420 monthly Social Security checks

Ida May Fuller, a 65-year-old retiree, was the first person to receive monthly social security payments.  On January 31, 1940, check number 00-000-001 was issued in the amount of $22.54 and for the next 35 years, the Social Security Administration mailed monthly checks to her home in Rutland Vermont.  Ida Fuller paid $24.75 into the Social Security System over a period of a little less than 3 years and then proceeded to live and collect to the ripe old age of 100, dying on the anniversary of her first check on January 31, 1975.

Will the real owner of SSN 078-05-1120 please stand up?
If you think that identity theft involving social security numbers in a new phenomenon, think again.  According to the Social Security Administration, one social security number has been improperly used by more than 40,000 people.
In 1938, a wallet manufacturing company thought it would be a good idea to promote its latest product by showing how a social security card would fit into its wallets, much like the sample family photo that comes in the plastic window of new wallets these days.  The company’s Vice President thought it would be a clever idea to use the actual SSN of his secretary, Mrs. Hilda Schrader Whitcher.  The shiny new wallets, duly equipped with Hilda’s card (for display purposes only), were distributed to Woolworth’s and other department stores, who happily sold the product to a surprisingly large number of customers.  
Then something strange began to happen.  The Social Security Administration began to realize that thousands were reporting income and paying taxes using Hilda’s social security number 078-05-1120.  Even though the card had the word "specimen" written across the face, many purchasers of the wallet adopted the SSN as their own. In the peak year of 1943, 5,755 people were using Hilda's number and it continued to be used for many years.  As late as 1977, 12 people were found to still be using the SSN "issued by Woolworth."

Social Security Today
For many Americans, Social Security is the primary source of retirement income.  For others, it is an important supplement to pensions, 401k plans and other types of personal savings.  This year, the maximum benefit for a person turning full retirement age is $2,315 per month.  And if that person lives for 30 more years, he or she will collect almost $1.5 million in benefits (assuming an annual 2.8% cost-of-living adjustment).  
When to start receiving social security benefits is a hugely important question for retirees to consider.  In the next few weeks, we will help you start thinking about Social Security so you can obtain all the benefits you’re entitled to and also learn what questions to ask when coordinating this important benefit with your other retirement plans.

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About this column: Steve Davis is a local CERTIFIED FINANCIAL PLANNER™ who has been helping clients in Mansfield, Foxboro, Easton and other local communities for more than twenty years.   You can find out more about Steve and his company, Davis Financial at www.talkwithdavis.com  or on Facebook at www.facebook.com/davisfinancial  

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  Securities offered through LPL Financial Member FINRA/SIPC 

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