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 70. The amount of income received is based on "your average indexed monthly earnings" during the 35 years in which you earned the most.  Spouses are also eligible to receive Social Security benefits, even if they have limited or non-existent work histories. A divorced spouse can also receive spousal benefits, if the marriage lasted 10 years or longer.

BREAKING DOWN '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?  and Types of Social Security Benefits.

RELATED TERMS
  1. Social Security Benefits

    The monetary benefits received by retired workers who have paid ...
  2. Social Security Tax

    The tax levied on both employers and employees used to fund the ...
  3. Social Security Trust Fund

    An account used by the United States federal government to record ...
  4. Old Age, Survivors And Disability ...

    The official name for Social Security in the United States. The ...
  5. Outside Earnings

    Income that temporarily reduces a retired individual's Social ...
  6. Social Security Act

    A law enacted by President Franklin D. Roosevelt in 1935 to create ...
Related Articles
  1. Retirement

    10 Common Questions About Social Security

    Find out everything you need to know about this program.
  2. Retirement

    The Purpose of a Social Security Statement

    Learn what information your Social Security benefit statement contains and how you can use the information to more intelligently plan for retirement.
  3. Retirement

    8 Types of Americans Who Won't Get Social Security

    Most Americans eventually get Social Security retirement benefits. Those who don't need a solid Plan B.
  4. Retirement

    Will the Social Security Cap Increase Help It Last Longer?

    The Social Security cap increase will be 7% in 2017, but even that may not be enough to keep Social Security from running out of funds.
  5. Retirement

    Introduction to Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  6. Retirement

    3 Ways to Get Social Security Benefits

    Social Security isn't just for retirement. Learn about all three benefits provided by the Social Security Administration: retirement, survivor and disability.
  7. Retirement

    How Social Security Works After Retirement

    Millions of Baby Boomers are looking forward to collecting benefits, but several factors can affect how much they get and whether the money is taxed.
  8. Retirement

    4 Things That Are Reducing Your Social Security

    Worried about Social Security dwindling? We discuss four ways it’s already happening.
  9. Retirement

    How Social Security Benefits Are Estimated & Taxed

    The Social Security check you'll get depends on your work history, when you start claiming a benefit and these other factors.
  10. Financial Advisor

    When Taking Social Security Early Can Make Sense

    Sometimes it makes financial sense to take Social Security early. Here's a look at when this might be a good idea.
RELATED FAQS
  1. What is the Social Security administration responsible for?

    Learn about the Social Security Administration's main responsibilities along with its history, structure and social safety ... Read Answer >>
Hot Definitions
  1. Book Value

    1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated ...
  2. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
  3. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  4. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  5. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  6. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
Trading Center