Social Security

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.



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