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. Cost Of Living Adjustment - COLA

    An adjustment made to Social Security and supplemental security ...
  3. Phases Of Retirement

    A six-stage process described by researcher Robert Atchley that ...
  4. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  5. Pension Pillar

    One of three pension formats as outlined by the World Bank in ...
  6. Canada Pension Plan - CPP

    One of three levels of Canada's retirement income system, which ...
RELATED FAQS
  1. How can I get a 'pensionado' visa to retire in Costa Rica?

    The first and primary criteria necessary to obtain a pensionado visa in Costa Rica is that you must have a pension or pension-like ... Read Full Answer >>
  2. Do I need to file an income tax return every year?

    Contrary to popular belief, there are indeed situations where a person does not need to file a tax return every year. For ... Read Full Answer >>
  3. Which United States Presidents have run the largest budget deficits?

    While most U.S. presidents over the past 75 years have run budget deficits for many if not all of their years in office, ... Read Full Answer >>
  4. How do I calculate my Social Security break-even age?

    Individuals nearing retirement can implement a number of strategies to cover living expenses during their post-working years. ... Read Full Answer >>
  5. What are the top Social Security scams targeted at the elderly?

    Elderly recipients of Social Security benefits are a highly targeted group for online con artists. Some scams operate over ... Read Full Answer >>
  6. Can I collect Social Security if I still have a job?

    It's possible to collect Social Security while you are still employed. You can collect both Social Security retirement and ... Read Full Answer >>
  7. Who is exempt from paying Social Security taxes?

    Social Security is a U. S. federal program that provides recipients with benefits, including retirement and disability income, ... Read Full Answer >>
  8. How can I avoid paying taxes on my Social Security income?

    Nearly 90% of individuals over age 65 rely on Social Security income to pay for a large portion of living expenses throughout ... Read Full Answer >>
  9. How do Social Security benefits for widows or widowers work?

    If you are the surviving widow or widower of a deceased worker who would have been eligible to receive Social Security benefits ... Read Full Answer >>
  10. What are the main differences between Social Security Benefits & Social Security ...

    While the names are very similar and they have similar purposes, there are a few marked differences between Social Security ... Read Full Answer >>
  11. What are the Social Security tax caps?

    The Social Security tax cap limits the amount of annual wages or self-employment income that is eligible for Social Security ... Read Full Answer >>
  12. How do Social Security survivor benefits work?

    Though it's not a pleasant subject, it is important to consider the financial future of your family in the event of your ... Read Full Answer >>
  13. How do I know what Social Security benefits I am eligible for?

    Depending on your age, wage history and disability status, you may be eligible to receive a variety of Social Security benefits. ... Read Full Answer >>
  14. How is the Social Security trust fund invested?

    The Social Security trust fund is an account held with the U.S. Treasury Department. The federal government uses it to record ... Read Full Answer >>
Related Articles
  1. Retirement

    How Much Social Security Will You Get?

    You've been paying in for years - now it's time to find out what the system owes you.
  2. Retirement

    Retirement: The One Thing Couples Shouldn't Do Together

    Staggering retirement can have both financial and emotional benefits for married couples.
  3. Retirement

    Create Your Own Social Security Fund

    The government's Social Security program may not last forever - be prepared by setting up your own.
  4. Retirement

    Will Your Retirement Income Be Enough?

    Find out how to determine whether you're on the path to a comfortable retirement, or financial ruin.
  5. Savings

    How To Maximize Returns By Choosing The Self-Directed Option

    Make sure your 401(k) plan has the self-directed option to ensure that your retirement is as comfortable as possible.
  6. Taxes

    Avoid The Social Security Tax Trap

    Government benefits can cost you big money! Know the income thresholds before you file.
  7. Retirement

    Introduction To Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  8. Options & Futures

    4 Unusual Ways To Boost Social Security Benefits

    Find out how to work the system to get the highest total benefits the law allows.
  9. Options & Futures

    What's The Minimum I Need To Retire?

    Make sure your golden years are golden, not merely a struggle for existence.
  10. Retirement

    Helping Your Clients Face The Financial Reality Of Retirement

    Altering retirement plans is tough, but when the retiree is unprepared, it's very necessary.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!