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. Substantial Gainful Activity - ...

    The threshold prescribed by the Social Security Administration ...
  3. Cost Of Living Adjustment - COLA

    An adjustment made to Social Security and supplemental security ...
  4. Pension Pillar

    One of three pension formats as outlined by the World Bank in ...
  5. Phases Of Retirement

    A six-stage process described by researcher Robert Atchley that ...
  6. Canada Pension Plan - CPP

    One of three levels of Canada's retirement income system, which ...
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. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center