Social security, as a concept, is designed to provide security for members of society who need it. The idea is that every member of society contributes so that no single individual has to bear the full burden of unforeseen catastrophes or hardships.
In the United States, this safety net is part of the Social Security Program administered by the Social Security Administration. Read on to learn more about the Social Security Act.
The United States Social Security Program was created in August 1935 with the Social Security Act. This established a benefits system for individuals including:
Prior to the 1930s, support for the elderly was a local and state matter. But the Great Depression led to congressional support for the proposal of a national old-age insurance system.
In response to President Franklin D. Roosevelt’s request for social security legislation, Senator Robert Wagner of New York and Representative David Lewis of Maryland introduced bills. These led to a compromise bill that passed and August 15th, 1935, and was signed by President Roosevelt into law.
One 1937 U.S. government pamphlet explained Social Security as such:
“In general, the Social Security Act helps to assure some income to people who cannot earn and to steady the income of millions of wage earners during their working years and their old age. In one way and another taxation is spread over large groups of people to carry the cost of giving some security to those who are unfortunate or incapacitated at any one time. The act is a foundation on which we have begun to build security as states and as a people, against the risks which families cannot meet one by one.”
The official name for the Social Security program is the Old Age, Survivors, and Disability Insurance (OASDI) program. OASDI is intended to provide several types of insurance benefits to workers and their families including retirement, disability, survivors, and more.
In contrast to welfare, social security benefits are paid at least partially based on a person’s employment records and history of contributions to the social security system.
Social Security is funded through payroll taxes on both employers and employees. These taxes are mandated by the Federal Insurance Contributions Act (FICA). There are also self-employment taxes mandated by the Self-Employed Contributions Act (SECA).
Social Security is administered by the Social Security Administration (SSA) and is closely linked with the Medicare program since its creation in 1965. It pays out monthly benefits to those who qualify. Each type of benefit has its own eligibility requirements but, generally speaking, workers must have been employed for a minimum amount of time and made contributions to Social Security in order to be eligible. Once a worker qualifies for a benefit, their family members may also automatically qualify.
While financial need is not a requirement for most types of Social Security, continuing to earn a minimum income may reduce an individual’s benefit amount.
Social Security is the largest government program, currently providing benefits to over 69.1 million people. Social Security expenditures are projected to exceed $1.3 trillion in 2023.
As workers age and more people retire, Social Security expenditures have increased faster than the tax revenue collected toward them. This has caused concern about whether or not the government will be able to pay out the benefits that workers are entitled to in the future.
There are different ways to apply for Social Security benefits including online and in person at a Social Security office. As part of the application, individuals will typically have to fill out forms, provide identifying documents, and include copies of tax returns.
Several factors may impact how much an individual receives as part of their monthly Social Security payment, including their earnings record and the age at which they begin taking benefits.
In order to increase the likelihood of having your application accepted, and to receive the highest possible payout, it’s recommended to work with a financial advisor or other experienced professional. They will be able to suggest when is best to apply, as well as assist you in properly filling out your application.
