Retirement & Financial Planning Report

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In a report that illustrates the value of inflation adjustments to retirement benefits, the Congressional Research Service has charted how a feature of Social Security has eroded in value over time because it is not indexed to inflation.

Under Social Security, a $255 lump-sum benefit generally is paid to the surviving spouse of a beneficiary, or to the beneficiary’s children under certain circumstances.

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“The lump-sum death benefit was once an important part of Social Security benefits to survivors. Between 1937 and 1939, the lump sum was the only benefit available to survivors of insured workers who died before 65 years old, and before 1952, the $255 amount was greater than three times the maximum monthly benefits payable under Social Security,” the report said.

Monthly benefits for survivors were added in 1939 and in the early 1950s the basic benefits formula was increased and a formula was applied to the lump-sum benefit. Because of inflation, that benefit reached its maximum for everyone in 1974, it said.

In 1954, the average death benefit per worker was $208, it said, equivalent to more than $2,000 in 2021 dollars—that is, the benefit is now worth only a tenth of what it was then.

The report noted that various bills have been introduced into Congress in recent years to raise the amount, in some cases to a higher flat dollar level such as $1,0000 and in other cases to apply a formula tied to the earnings that are used to set a person’s monthly benefits.

In contrast, it said, President Bush’s fiscal 2007 budget “proposed eliminating the benefit, arguing that it ‘no longer provides meaningful monetary benefit for survivors’ and that it results in high administrative costs.”

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