Understanding Social Security

5/30/2016


The United States Social Security Program, started in 1935, is meant to provide supplemental support for retired or disabled persons in the United States.

How It Works
Unless you were employed by an agency that opted out of the Social Security system, every paycheck you've earned throughout your life has had Social Security tax taken out of it. This money isn't reserved for you when you retire. It's put into a large fund from which current Social Security benefits are paid. But your tax isn't being taken in vain. You receive Social Security credit for your tax. You need to have been employed for at least 40 quarters under Social Security to be eligible for Social Security benefits when you retire.

Social Security Updates
All workers who are over the age of 25 who are not yet receiving Social Security benefits receive yearly statements from the Social Security Administration. These statements contain your earnings over the years as well as estimates for your Social Security retirement, disability and survivor's benefits. Check these statements carefully to make sure you are getting credit for all of your earnings. Errors could affect your benefits.

When You Are Eligible
The soonest you can receive Social Security retirement benefits is at age 62. But if you delay receiving benefits until a few years later, your benefit amount will be greater. This decision should be based on your financial position - do you need the money or can you wait until your benefits reach their full potential? No matter when you choose to start collecting benefits, you must sign up three months in advance of when you actually want to receive your first check.

The Social Security Crisis
More than 59 million Americans collect Social Security benefits each year. That's more than 45 million people. For now, there is more money going into the Social Security fund than is being paid out. But as the baby boomer population gets older, there will be many more people eligible for Social Security benefits. The money going into the fund will not be enough to cover all the benefits being paid out.

Related: Do I Have Enough Retirement Money?

Related: The Lowdown on Medicare and Medicaid

Related: Take a Close Look at Social Security in 2016

Related: Individual Retirement Savings Options

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