Getting Back More Than You Put In

Question: I read your recent column on Social Security and feel that you may be able to give me your candid opinion on a Social Security question.

Consider an individual working for an employer and contributing his share of FICA taxes since the inception of the program and continuing to pay at the maximum wage for the final 30 years until retirement at age 68 in about 1969. How long would this individual have to live in order to use up the actual monies contributed by him and his employer?

And, if this same individual has a spouse drawing one-half of the recipient’s amount, and if both individuals are receiving necessary health care through Medicare, could one assume that this couple would be receiving much, much more than they had ever paid into the program, including the employer’s percentage?

I would appreciate an answer because I have had an ongoing disagreement on the subject in recent years. Whichever way it turns out, it will put my mind at rest.--M.S.

Answer: I don’t know on which side of this argument you find yourself, but if you are taking the position that this hypothetical couple had a whale of a deal, you would be dead right.

It’s a little difficult (going backward) to compute exactly how much this man contributed into Social Security, but between 1937 (when it began) to ’69 (when he retired), the maximum amount he himself could have contributed, according to Joe Giglio, public affairs specialist in Los Angeles for the Social Security Administration, was $3,391--with a like amount coming from his employer.

(In the beginning, remember, the maximum contribution for quite a number of years was 1% of the first $3,000 of income--or $30 a year. As late as ’77 the maximum contribution was still less than $1,000 a year.)

And so, when this man retired in 1969, the maximum benefit was roughly $160 a month. (It could have been a bit more than that because he was 68 years old instead of 65.) His non-working wife’s benefit was about $80 a month for a total Social Security check of about $240--$2,880 a year.

At the time of his retirement, Giglio adds, he and his employer had each contributed $3,391 for a total of $6,782. All of which means, obviously, that he had gotten back everything that he and his employer had contributed in just a hair over two years. And this is quite apart from everything that he and his wife have also received from Medicare since retirement.

“A very good deal, indeed,” Giglio observes. “And, as late as 1985, the maximum that anyone could have paid in was about $24,000, while the maximum monthly benefit had risen to more than $700 a month.” And so, as late as ‘85, it was still a pretty good deal. On a combined maximum contribution (employee and employer) of about $48,000 and with monthly benefits at about $700, the Social Security recipient is still getting everything back in fewer than six years.

The point can be made (and frequently is) that younger workers aren’t going to fare nearly as well. And this is true, of course.

The average worker who turned 21 in 1984, for instance, will pay a total of about $720,100 in taxes by the time he reaches 65. But, based on his life expectancy, he should receive about $1,618,000 in benefits--or about $2.25 in benefits for every $1 in taxes. That’s still a pretty fair return on his money in spite of the sharp climb in contributions.

Q: The chutzpah of some banks is becoming more irritating daily. Recently, an elderly woman I know applied for a check-guarantee card. She had one at another large bank for 27 years but wanted to open an account with another more conveniently located bank. This woman owns her home free and clear, has occupied it for 27 years and has considerable other assets. One would think a simple check-guarantee card under such conditions would be easy to get. Not at all.

Officials to whom she talked about a card wanted copies of her IRS returns for two years. Their explanation was that such evidence would help them to evaluate her bill-paying credibility. The applicant offered to copy only the front page of a rather voluminous return, but, no, they wanted the whole thing. Not for credit, mind you, but for a simple check-guarantee card. Naturally, she refused, protesting that her return was strictly private. Who knows, she said, who in the bank might get hold of such information and use it adversely?--E.N.

A: We bounced this off a friend in the banking business to see if there might be some element here that a couple of laymen like you and me are missing. Not so.

As he put it: “That’s the sort of information you’re expected to provide when you’re applying for a mortgage. Not even for a car loan would we require such information.”

OK, admittedly she’s applying for this card at “another” bank--one more conveniently located than the one where she has been doing business--and so she’s an unknown quantity with the new bank. But, still and all, our friend insists, normally the information requested on the check-guarantee application form is sufficient, although, in the case of a brand-new customer like your friend, it wouldn’t be out of line for them to run a routine credit check on her through TRW or Trans Union.

But a copy of her entire tax return for two years? No way.

“I think she must have run into somebody pretty new and inexperienced who didn’t really know what information is required , “ our banker adds, “and so, to be on the ‘safe’ side, he or she just asked for everything.”

Neither of us blames your friend for telling the bank to go peel a fig. Her tax return is none of its business.

Don G. Campbell cannot answer mail personally but will respond in this column to consumer questions of general interest. Write to Consumer VIEWS, You section, The Times, Times Mirror Square, Los Angeles 90053.