What Exactly Is Social Security? (And How Much Money Do You Get?)
CREDIT: mokra | sxc.hu
In the United States, "social security" usually refers to the government's social insurance program, which provides payments to disabled people, retired workers and their spouses and families. This insurance is officially called the Old-Age, Survivors and Disability Insurance (OASDI) program.
Social security is funded by taxing workers' pay through the Federal Insurance Contributions Act tax, commonly called FICA. As of this year, the social security tax rate is 6.2 percent on earnings up to $106,800. Any income earned above this amount is not subject to the tax.
How did social security get started?
OASDI was put into place by the Social Security Act, signed by President Franklin Roosevelt on Aug.14, 1935, as a way to protect the elderly from poverty and ease the effects of unemployment. Originally, the act only subjected some jobs to the paying the tax , and only people in those jobs could receive benefits.
Today, most work — even self-employment — is subject to and benefits from social security. The original program also didn't include disability insurance, or benefits for a surviving family. These provisions were added later.
According to the Social Security Administration, the first social security taxes were collected in 1937, and the first regular payments were made to a retired woman named Ida Mae Fuller in 1940. Fuller received $22.40 monthly.
OASDI paid a total of $35 million in benefits in 1940. By 2008, total social security payments rose to more than $500 billion yearly, according to the SSA.
How much do you get?
To receive social security, a worker must have worked at least 10 years, or collected 40 credits in the program's credit system, according to the SSA. Workers receive a credit for every $1,120 they earn, up to 4 credits per year.
To receive disability benefits, a person must suffer a disability that both meets the system's criteria and prevents them from working. Covered disabilities include a range of injuries and illnesses, such as a limb amputation and diseases of the immune system.
The official retirement age, at which you can receive full benefits, is 66. Workers can retire as early as 62, but receive reduced benefits, according to the SSA. The longer you continue working after age 65, the more your monthly payout will be.
The amount of money you receive is based on an average of your 35 highest-paid years, and is adjusted for inflation in the cost of living over your lifetime. Workers who worked more years, or had a higher salary and higher tax payments into the system, receive higher payments when they become eligible. As of 2010, the average monthly benefit is about $1,050 according to the AARP.
In most years of the OASDI program, payments made into the system by working people have equaled or exceeded payments out. But with large numbers of baby boomers entering retirement, and a historical decline in birthrates reducing the number of workers paying in, this balance is not expected to continue, according to future projections.
People of all political ideologies have proposed ways to fix the imbalance — they range from privatizing all or part of the system to raising social security taxes on higher incomes.
- How Are Our Federal Tax Dollars Spent?
- Which Single Piece of Currency is Worth the Most?
- What Are the Most Bizarre Luxury Taxes?
Got a question? Email it to Life's Little Mysteries and we'll try to answer it. Due to the volume of questions, we unfortunately can’t reply individually, but we will publish answers to the most intriguing questions, so check back soon.
Life's Little Mysteries: Gift Edition Hardcover Book
Uncover the truth behind more than 100 mysteries that surround us every day with our new hardcover book! Perfect for gifts and classrooms, and suitable for all ages. Some of the included mysteries are:
- Why Do Cats Land on Their Feet?
- How Long Does it Take to Make Petrified Wood?
- What Everyday Things Around Us Are Radioactive?
Find out all of this and much, much more in our NEW hardcover book.
It makes a great gift idea for all ages. more info>>