Skip to Content

How Social Security Works

Social Security in the United States is a form of legally mandated insurance designed to provide old age (retirement), disability and survivor benefits. Payroll taxes and self-employment taxes fund the system, in theory, based on the Federal Insurance Contributions Act (FICA). In reality, the system is running out of money, as a shrinking base of younger people are called upon to support a growing number of older people, creating a perennial political issue.

To begin receiving Social Security checks, a person aged 62 or older must apply for the benefits. They do not begin automatically. The amount paid varies according to the size of contributions the applicant has put into the system, during his or her working life. The later in life the person applies, the greater the monthly payout. Depending on birth year, applying at age 65, 66 or 67 instead of 62 will bring a greater level of benefits. At the beginning of 2011, the average Social Security payout for a retired worker was $1,177 a month.

If a person becomes disabled, under certain circumstances he or she may be entitled to Social Security disability benefits, although qualification for these may be difficult to prove. If a person dies, depending on circumstances and various calculations, the surviving spouse and children may be entitled to payments.

Each person’s unique Social Security Number acts as a record-keeping indicator for the Social Security system, although in American life it acts as a major identifier in many other areas, particularly taxes.

The Social Security Administration has offices in most communities, all of which provide information, assistance and numerous free publications. Americans are at all times entitled to information on their current Social Security accounts and the benefits they should expect to receive when they qualify.

Next Section:How Medicare Works

Retirement and Aging: Chapter Home

Life in the USA Home Page.