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 one’s average monthly earnings. Spouses are also eligible to receive Social Security benefits, even if they have not worked.
BREAKING DOWN 'Social Security'
The original program was part of President Franklin D. Roosevelt's New Deal plan during the Great Depression. Today, the program is funded through payroll taxes collected from employees and companies. The monies are placed into the Social Security Trust Fund and payments are managed by the government.
Social Security has faced serious solvency (ability to pay) issues for decades. Today's payments into the system are made 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 raises strong opinions.
Social Security faces an uncertain future because of factors such as longer life expectancies, a large Baby Boomer population currently entering retirement age, and inflation.
Source: Social Security
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