Welcome to another edition of Macro Mondays! Today I think we would address a topic that is of great importance to millions of Americans, yet many might not fully understand the implications behind it. I’m talking, of course, about Social Security — the program that helps keep millions of seniors funded in retirement as well as providing them with survivor and medical benefits. It is NOT an entitlement program, as we have mentioned on GradMoney many times before, but acts a national ‘insurance’ measure if you will.
This article is meant to provide you with the bare bones basics of the Social Security program. For more information on Social Security and associate programs, visit Investopedia.
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 70. The amount of income received is based on “your average indexed monthly earnings” during the 35 years in which you earned the most. Spouses are also eligible to receive Social Security benefits, even if they have limited or non-existent work histories. A divorced spouse can also receive spousal benefits, if the marriage lasted 10 years or longer.
How did ‘social security’ begin?
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.
