What is Social Security?
Social Security is a government program in the United States that provides financial assistance to individuals and families in various life situations, primarily focusing on retirement, disability, and survivor benefits. Established in 1935, it serves as a safety net to ensure that those who have contributed to the system receive monetary support when they can no longer work or in times of need.
The program is funded through payroll taxes collected under the Federal Insurance Contributions Act (FICA). Workers earn "credits" based on their work history. Typically, individuals need to have 40 credits, which generally equates to about 10 years of work, to qualify for retirement benefits. The amount received each month varies based on earnings history and the age at which one decides to claim benefits.
For effective retirement planning, understanding Social Security benefits is essential. It can significantly influence your retirement budget. Decisions about when to start taking benefits—at 62, full retirement age, or age 70—can impact the total amount received over a lifetime. Therefore, careful planning and consultation with a financial advisor can optimize Social Security benefits as part of a comprehensive retirement strategy.