Monday was my 61st birthday -- one year away from retirement, or least one year away from the right to collect a small amount of Social Security.
I was thinking about this retirement planning milestone when I stumbled on an Associated Press story published Monday that said: "A married couple retiring last year after both spouses earned average lifetime wages paid about $598,000 in Social Security taxes during their careers. They can expect to collect about $556,000 in benefits, if the man lives to 82 and the woman lives to 85, according to a 2011 study by the Urban Institute, a Washington think tank."
The piece continued, quoting people both defending and reviling the program, but I couldn't get past those initial numbers. They looked wrong. So I called Richard Johnson, who is the director of retirement policy for the Urban Institute, and asked him to explain how it worked.
Johnson said that the AP story leaves out some key parameters. In order for a couple to be getting back less than they put in, they'd both have to have earned the average income on which Social Security is based over the last 40 years -- no breaks. If during those 40 years, they had put the money they'd paid in Social Security payroll taxes into an account returning a steady 2 percent interest, then they would have accumulated more than they would be eligible to receive -- unless they live to be older than 82 and 85.
Johnson said, "These numbers are based on prototypical people, and those people aren't common. In fact, they are very rare. We have numbers that look at the entire population's experience and in general, most people are doing much better."
The typical worker born between 1951 and 1955 at full retirement age will get back at least 17 percent more in benefits than he contributed in taxes. A worker born after 1956 will get back at least 15 percent more than he contributed.
"Social Security remains a good deal for most people approaching retirement," Johnson says.