The Social Security program was established in 1935 to provide retirement income to certain workers. The program was later expanded to cover most of the workforce. Prior to the program's development, individuals were completely responsible for funding their personal financial needs both during their working years and during retirement. If an individual failed to save for retirement, that individual was unable to retire from the workforce. Like any large, complex government program, there are many components to Social Security. Ten common questions about the program are addressed below. (For background reading, see Introduction To Social Security .)
1. When Am I Eligible to Receive Benefits?
- If you were born prior to 1938, your full eligibility date is age 65.
- If you were born after 1960, your full eligibility date is age 67.
- People born in between 1938 and 1942 are eligible on a graduating scale that increases by two months per year.
- Persons born between 1943 and 1954 are eligible for full benefits at age 66.
- Those born between 1955 and 1960 are eligible based on a graduating scale that increases by two months per year, culminating in an eligibility age of 67 for those born in 1960 or later.
4. Can I Receive Social Security If I Am Still Employed?
5. How Does Social Security Work for My Spouse?
6. What Happens If My Spouse Dies?
If the surviving spouse has reached their full retirement age, the spouse is entitled to 100% of the deceased worker's basic benefit amount. Prorated amounts are paid to surviving spouses that have not yet reached retirement age. If the surviving spouse was receiving Social Security benefits and the deceased's benefits were greater, the survivor will receive the higher benefit amount.
7. Is The System In Trouble?
The Social Security program is a "pay-as-you-go" system. Money paid in by current taxpayers is spent to pay benefits to current retirees. As the ratio of current workers to current retirees drops, fewer people will be paying
into the system as a larger number makes withdrawals. In addition, people are living much longer than when the program first began in the 1930s, and this stretches out the payments that millions of Americans will be receiving. (For more insight, see Social Security Depletion: Is The Fear Justified? )
8. What About the Social Security Trust Fund?
Many people believe that the money taken from their paychecks goes into a "trust fund ," and remains there earning interest until the person, that paid the money into the system, retires and begins to take it back. This vision of a trust fund is a myth.
Tax income is deposited on a daily basis, and is either exchanged for a government IOU or invested in government-issued Treasury bonds. In both cases, the cash goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund. Politicians spend the cash, relying on future generations of taxpayers to make good on the IOUs, and to repay the principal underlying the Treasury bonds. As the number of retirees increases and the number of workers declines, repayment of the IOUs and bond principal will be necessary in order to meet the payments owed to retirees. According to the Social Security Administration's (SSA) "Summary of the 2010 Annual Reports ," that development is expected to occur in 2018, and Social Security Old-Age and Survivors Insurance (OASI) is projected to be unable to meet its obligations around 2040, despite the repayments. The "trust fund" exists only as an accounting model, not as an actual funded account. (To learn more, read The Generation Gap .)
Because current retirees make up such an enormously active voting block, and current workers hope to retire someday, politicians feel that changing the system will hurt their chances for re-election, or otherwise stunt their careers. Former Speaker of the House Tip O'Neill referred to Social Security as the "third rail of politics. Touch it and you die!"
10. Will There Be Any Money Left When I Retire?