What is '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.

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?

RELATED TERMS
  1. Social Security Benefits

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

    An account used by the United States federal government to record ...
  3. Social Security Tax

    The tax levied on both employers and employees used to fund the ...
  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

    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.
  3. Retirement

    Introduction to Social Security

    You've probably contributed to this fund, but will you reap the benefits? Find out here.
  4. 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.
  5. Retirement

    How To Make Social Security Work

    What's going to happen to Social Security by the time you retire? What can be done to help it?
  6. Retirement

    4 Things That Are Reducing Your Social Security

    Worried about Social Security dwindling? We discuss four ways it’s already happening.
  7. 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.
  8. Financial Advisor

    10 Things You Need to Know About Social Security

    Every saver should know these ten things about Social Security retirement benefits.
  9. Retirement

    Will Baby Boomers Bankrupt Social Security?

    Will the massive Baby Boomer generation, now retiring in droves, bankrupt the Social Security System?
  10. Retirement

    What Will Social Security Look Like When You Retire?

    Many workers are not confident that Social Security will be around during their retirement. Here's what you need to know about its future.
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 >>
  2. Must I pay Social Security taxes on my earnings after full retirement age?

    Paying Social Security contributions continues even past reaching full retirement age, but that can increase future Social ... Read Answer >>
  3. Why is Social Security running out of money?

    Find out why you may not have Social Security benefits available to you when it's time to retire. Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  3. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  4. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  5. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  6. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
Trading Center