Social Security

AAA

DEFINITION of 'Social Security'

A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits include retirement income, disability income, Medicare and Medicaid, and death and survivorship benefits. Social Security is one of the largest government programs in the world, paying out hundreds of billions of dollars per year.

Based on the year someone was born, retirement benefits may begin as early as age 62 and as late as age 67. The amount of income received is based on the average wages earned over the worker's lifetime, with a maximum calculable amount of $102,000 as of 2008. Spouses are also eligible to receive Social Security benefits, even if they have limited or non-existent work histories.

INVESTOPEDIA EXPLAINS 'Social Security'

The original program was part of President Franklin D. Roosevelt's New Deal plan to lift the U.S. out of the Great Depression. Today, the program is funded through payroll taxes collected by employees and companies; monies are placed into the Social Security Trust Fund and payments are managed by the government along with the Federal Reserve Board.

Social Security has faced serious solvency issues for many decades; today's payments are made from current payroll contributions by workers who may not have money available for them when they retire. Social security reform, whether through legislation, tax law changes, or privatization, has been a major political issue that draws strong opinions from different demographic segments.

Social Security faces the real threat of becoming insolvent because of factors such as longer life expectancies, a large baby boomer population currently entering retirement age, and inflation.

To learn more about social security, check out Can my spouse and children collect my Social Security when I die? 

RELATED TERMS
  1. Federal Unemployment Tax Act - ...

    The original legislation that allows the federal government to ...
  2. Canada Pension Plan - CPP

    One of three levels of Canada's retirement income system, which ...
  3. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  4. Social Security Number - SSN

    A nine-digit number assigned to citizens, some temporary residents ...
  5. Disability-Income (DI) Insurance

    An insurance product that provides supplementary income in the ...
  6. Social Security Administration ...

    A U.S. government agency created in 1935 by President Franklin ...
Related Articles
  1. How is the Social Security trust fund ...
    Retirement

    How is the Social Security trust fund ...

  2. How do Social Security benefits for ...
    Retirement

    How do Social Security benefits for ...

  3. How do Social Security survivor benefits ...
    Retirement

    How do Social Security survivor benefits ...

  4. How do I know what Social Security benefits ...
    Retirement

    How do I know what Social Security benefits ...

Hot Definitions
  1. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  2. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  3. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  4. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  5. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
  6. Macroeconomics

    The field of economics that studies the behavior of the aggregate economy. Macroeconomics examines economy-wide phenomena ...
Trading Center