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Social Security Retirement Benefits

Social Security was enacted
  in 1935 to provide some relief to America’s destitute older citizens during
  the economic cataclysm known as the Great Depression. A direct descendant of
  that more limited effort, today’s Social Security program is in fact a group
  of related programs, each with its own eligibility and payment rules: retirement,
  disability, survivors and dependents benefits.

The best known of these
  programs is retirement, known formally as Old-Age and Survivors Insurance (OASI).
  Under this program, Social Security provides income to retirees, as well as
  benefits to a worker’s surviving spouse and to a retired worker’s children under
  age 18. As of September 2000, the program was issuing benefits to some 32 million
  retired workers and their dependents, as well as to nearly 7 million survivors
  of deceased workers.

Social Security benefits
  are financed primarily through dedicated payroll taxes paid by workers and their
  employers. Employees and employers split the 15.30 percent payroll tax equally,
  with employers paying 7.65 percent of an employee’s income, and the employee
  kicking in the same. Self-employed individuals pay the entire 15.30 percent
  payroll tax.

For most retired workers
  and their dependents, however, Social Security retirement benefits alone are
  not enough for them to maintain the standard of living they had before retirement.
  Although Social Security benefits are protected against inflation by annual
  Cost of Living Adjustments, the average retirement benefit for retirees is only
  about $1,044 a month, and the survivors of workers receive an average of only
  $1,008 a month (2007 figures). For 2007, the maximum monthly Social Security retirement benefit
  for a worker retiring at the full retirement age of 65 years and ten months is $2,116.


Who Is Eligible?

Social Security retirement
  benefits are not based on need but rather on income earned during your earning
  life. The Social Security Administration (SSA) keeps a record of earnings over
  your working life and pays benefits that are based on the average amount earned,
  provided a minimum number of work credits have been accumulated. Only income
  on which Social Security tax is paid is considered in calculating these work

To be eligible for Social
  Security benefits, a worker born after 1928 must have accumulated at least 40
  quarters of work in "covered employment" (see below). A "quarter of coverage" generally means the three-month
  calendar quarter. In addition, you must earn at least $1,000 in a quarter (in
  2007) for it to count. However, the SSA looks at how much you earned in a year
  and divides that figure by the minimum amount required to earn credit for a
  quarter. Thus, if you earn at least $4,000 in January and February of 2007 and don’t
  work the rest of the year, you will receive credit for four quarters of work
  ($4,000 ÷ $1,000 = 4).

For Social Security purposes,
  "retirement" is defined as whenever you choose to begin receiving benefits after
  you reach age 62–whether or not you are actually still working. Starting at
  age 62 you can begin receiving benefits, provided you have accumulated the minimum
  required quarters of coverage (although you will pay a penalty for retiring
  before your "full retirement age," as explained in the following section). You do not have to actually stop
  working to be eligible to receive Social Security retirement benefits, although
  if you have not yet reached your full retirement age your benefits may be reduced
  depending on how much income you earn. Conversely, you can stop working entirely
  and still postpone receiving Social Security retirement benefits (see The Delayed
  Retirement Option below). However, if you stop working, your average earnings
  over your working life may be less and this may result in a reduced benefit.


  Your Eligibility and Estimated Benefits

You can find out how many quarters
of coverage you have accumulated and what your estimated benefit will be at the
time of retirement by requesting Social Security Statement SSA-7004 (formerly
known as the Personal Earnings and Benefit Estimate Statement) from the SSA. You
can request a copy by mail or online by visiting the SSA Web site.

There is no charge for this
  service, and in addition to your quarters of coverage the statement will provide
  your earnings reported in each year.

You can also calculate your
  future Social Security benefit based on your current and projected earnings
  by using the SSA’s online Benefits Calculator.

How benefits
  are calculated

You must attain your "full
  retirement age" before being eligible to receive your full monthly Social
  Security benefit, which is referred to as your "primary insurance amount" (PIA).
  (You can choose to retire early, but you will then receive reduced benefits;
  see section below for details.) If you were born before 1937, you have a full retirement
  age of 65. If you were born after 1937 you must wait longer before attaining
  full retirement age, although exactly how long depends on your year of birth,
  according to the following table:






























































    persons born on January 1 of any year should refer to the normal retirement
    age for the previous year.
        of birth
        retirement age
        and prior




          and 2 months



          and 4 months



          and 6 months



          and 8 months



          and 10 months






          and 2 months



          and 4 months



          and 6 months



          and 8 months



          and 10 months


        and later



The early retirement option
You can begin receiving
benefits any time between age 62 and your full retirement
age, but you will pay a price in reduced
monthly benefits for the rest of your life. If you
take the early retirement option, your benefits will be reduced 5/9 of one percent for each month before
your full retirement age that you begin receiving benefits, up to 36 months. For
each month above 36 months before your full retirement
age, the reduction formula is 5/12 of one percent. For example, if you were born in 1944 and decide to retire at age 62, four
years before your full retirement age of 66, there
are a total of 48 months of reduction. The reduction for the first 36 months is
5/9 of 36 percent, or 20 percent. The reduction for the remaining 12 months is
5/12 of 12 percent, or 5 percent. Thus, your total benefit reduction is 25 percent. If
your full
benefit (your PIA) was to be $1,200, your reduced benefit will be $900
($1,200 – 25 percent = $900). You will receive this
reduced benefit (plus cost of living adjustments) for as long as you receive Social Security.

Although most Social Security recipients take the early retirement option,
whether you should depends on your need for income, the availability of other
income sources, and your health and likely longevity.

The delayed retirement option
Just as you pay a penalty for receiving benefits early, you receive a bonus
for delaying their receipt beyond your full retirement age. How much your
deferment of benefits will increase your monthly check when you ultimately
retire depends on your year of birth:

























































    Persons born on January 1 of any year should refer to the credit percentage
    for the previous year.
        retirement credit
Year of birth Credit per year
1924 3.0%
1925-26 3.5%
1927-28 4.0%
1929-30 4.5%
1931-32 5.0%
1933-34 5.5%
1935-36 6.0%
1937-38 6.5%
1939-40 7.0%
1941-42 7.5%
        and later


If you delay your retirement beyond age 70, you will receive no
further increases in your PIA, no matter how long you continue to work.

Here’s an example of how the deferred retirement option might increase a
beneficiary’s PIA: Lena was born in 1936. Although she is eligible for her full
Social Security retirement benefit at age 65, Lena doesn’t plan to retire until
she reaches age 68. The table above tells us that her annual percentage increase
in benefits will be 6 percent. Since she will delay her retirement three years,
the Social Security check she will begin receiving when she retires will be 18
percent higher (3 years x 6 percent per year). If Lena’s monthly benefit would
have been $1,000 had she retired at age 65 (including any cost of living
adjustments that were made between age 65 and her retirement), the monthly
benefit she will begin receiving at age 68 will be $1,180.

In determining whether to either postpone your retirement or cut back on your
work hours, call the Social Security Administration at (800) 772-1213 or use the
SSA’s Benefits
. The SSA can tell you exactly what your benefits will be under
different scenarios.  For information on how continuing to work affects your Social Security benefits, click here.

One factor to keep in mind when considering the delayed retirement option: If
you keep working after age 65, your ultimate Social Security benefits can also
be higher because you will have more earning quarters on which to base your
benefit calculation. This will be true whether or not you elect to begin
receiving benefits while you continue working.

For more information on the factors involved in delaying Social Security benefits, click here.

Finally, regardless of whether you choose to begin receiving retirement
benefits at age 65, you should remember to sign up for Medicare. You should do
this during the period beginning three months before your 65th birthday and
ending three months afterwards.

How does the SSA calculate the monthly benefit?
The process by which the SSA calculates
your PIA is fairly
complicated, but it is based on your earnings history. The formula is somewhat redistributive in that the
first few hundred dollars of earnings are given more credit than the last few
hundred. So, in relationship to earnings and contributions to the system, low
wage earners receive more back in Social Security benefits than do high wage


Benefits to Spouses and Children

A little-known feature of the Social Security
system is that in addition to paying retirement benefits for the retired worker,
it may provide benefits to the worker’s spouse, an ex-spouse if the marriage
lasted at least 10 years, and dependent children and grandchildren, depending on
the circumstances. Moreover, these benefits can be paid all at the same

Spousal benefits:
Your spouse is entitled to an amount equal to one-half of your full
PIA. In order to receive this benefit, your spouse must be at least 62
years old or caring for your child who is under age 16. Also, you must
have filed for Social Security benefits (though you do not need to be
receiving benefits) in order for your spouse to receive them as well.

It may be that your spouse could receive more from Social Security based on
her own earnings record than through your spousal benefit. If this is the case,
the Social Security Administration automatically provides your spouse the larger

If you retire early, your spouse will still receive benefits based on
one-half of the PIA you would have received had you waited until full retirement
age to retire. But in order to receive a full half of your PIA, your spouse must
wait to begin receiving the retirement benefits at her full retirement age. If
she opts to receive benefits before that time, she will be penalized according
to a formula similar to that used to compute the reduced benefits of workers who
retire early.

Children’s benefits: Children and even grandchildren who are unmarried
and dependent upon you (the retired worker) for their support are eligible
for benefits. To be eligible, the child must be under age 18, under age 19 but
still in elementary school or high school, or over age 18 but have become
mentally or physically disabled prior to age 22.

Children generally receive an amount equal to one-half of your PIA, up to a
"family maximum" benefit. The family maximum is calculated when you reach age
62, and is determined by a formula similar to that used to determine the PIA.
The family maximum depends on the amount of your benefit and the number of
family members who also qualify on your work record. The total varies, but it is
generally equal to about 150 to 180 percent of your retirement benefit. The
family maximum benefit rises annually with the cost of living.

Because of the maximum, the more dependants you have, the less their
individual benefit will be, although your own benefit will not be reduced. For
example, let’s say Henry’s PIA is $1,500 and his family maximum is $2,300. Henry
would receive his $1,500 a month, and his wife, Beatrice, and their dependent
child, Barbara, would split the remaining $800 a month ($2,300 – $1,500). If
Henry and Beatrice had two children who qualified for benefits, the remaining
$800 after Henry’s benefit would be evenly divided three ways. Upon the worker’s
death, dependent children receive 75 percent of the worker’s PIA, up to the
family maximum, until they outgrow their eligibility.

Divorced spouse’s benefits: If you are the retired worker, your
divorced spouse is eligible to receive an amount equal to one-half of your PIA,
provided the marriage lasted at least 10 years. The rules are similar to those
for spousal benefits described above, with two notable exceptions. First, your
divorced spouse can begin receiving benefits even before you have begun
receiving benefits yourself. The SSA does require, however, that you be at least
62 years old and that the divorce have been final for at least two years if you
have not yet reached full retirement age. Second, your divorced spouse’s
benefits are not counted in your "family maximum" benefit described above, and
they do not affect that maximum.

Divorced spouses who had more than one marriage that lasted at least 10 years
do not receive multiple benefit checks, one for each marriage. But the
SSA does automatically choose the
former marriage that will yield the largest benefit to the ex-spouse. Divorced
spouses who re-marry are ineligible for benefits unless the marriage occurs
after the spouse is 60 years old.

Survivor’s benefits: If
you die and your spouse has by that time reached full retirement age,
your spouse begins receiving your actual benefits. This is true even if
you and your spouse have divorced, so long as you had been married for
at least 10 years. If your surviving spouse has not yet reached full
retirement age but is at least age 60, she receives an actuarially
reduced percentage of your benefits. At age 60, for example,
she will receive 71.5 percent of your actual benefits. This percentage
increases each year until she reaches full retirement age herself, at
which point she begins receiving 100 percent of your actual benefits.
Spouses younger than 60 may be able to receive benefits in limited
circumstances, such as cases of disability or if they are caring for
a disabled child.

Finally, the widow (if not divorced) of a deceased worker or his children
under age 18 are entitled to a lump sum death benefit of $255.

When a beneficiary dies
Social Security payments are made on the third day of each month as payment
for the previous month. Thus, a Social Security recipient must have survived the
entire month to be entitled to the payment. For example, if a recipient dies on
June 24, the payment made on July 3 will have to be returned. Consequently, in
most cases the estates of decedents must pay back the SSA for the last payment

The executor, administrator, or next-of-kin should notify the SSA by calling
the 800 number for the state in which the deceased resided. (Often funeral homes
provide this service.) If the recipient had her Social Security deposited
directly into her bank account, the SSA will arrange to withdraw the payment
electronically. The bank account must remain open for at least 45 days following
notification to the SSA of the death. If the payments were mailed rather than
direct-deposited, the SSA will send a letter requesting


  for Retirement Benefits

The SSA advises you to apply for retirement benefits
three months before you want your benefits to begin. And, as noted above, even
if you have no plans to receive retirement benefits, you should still sign-up
for Medicare three months before age 65.

You can apply for retirement benefits online. Connect to the Internet
Retirement Insurance Benefits application and
follow the instructions. You can also apply by calling the SSA’s toll-free
number, 1-800-772-1213. Representatives there can make an appointment for your
application to be taken over the telephone or at any Social Security Office.
(Don’t know where your local Social Security Office is? Click here for the SSA’s
Security Locator

People who are deaf or hard of hearing may call the SSA’s toll-free "TTY"
number, 1-800-325-0778, between 7 A.M. and 7 P.M. on Monday through Friday.

When you apply for benefits, you will need the following information:


  • your Social Security number;
  • your birth certificate;
  • your W-2 forms or self-employment tax return for last year;
  • your military discharge papers if you had military service;
  • your spouse’s birth certificate and Social Security number if he or she is
      applying for benefits;

  • children’s birth certificates and Social Security numbers, if applying for
      children’s benefits;

  • proof of U.S. citizenship or lawful alien status if you (or a spouse or
      child is applying for benefits) were not born in the U.S.; and

  • the name of your bank and your account number if you want your benefits
      directly deposited into your account.

You will need to submit original documents or copies certified by the issuing
office. You can mail or bring them to the SSA. The SSA will make photocopies and
return the documents to you.



of Social Security Benefits

Although Social Security benefits are generally not taxable,
people with substantial
income in addition to their Social Security may pay taxes on their benefits. If you file a federal tax return as an
individual and your "combined income" – including Social Security benefits and
nontaxable interest income – is between $25,000 and $34,000, 50 percent of your
Social Security benefits will be considered taxable. If your combined income is
above $34,000, 85 percent of your Social Security benefits is subject to income tax.
If you file a joint return and you and your spouse have a combined income
between $32,000 and $44,000, 50 percent of your benefits will be subject to tax.
If your combined income is more than $44,000, 85 percent of your Social Security
benefits is subject to income tax.

For more information on the taxation of Social Security benefits, call the
Internal Revenue Service’s toll-free telephone number, 1-800-829-3676, and ask
for Publication 554, Tax Information for Older Americans, and Publication
915, Social Security Benefits and Equivalent Railroad Retirement
. You can also access these publications on the IRS Web site. Calculating the taxes you owe on
your Social Security benefits is also explained in the instruction booklet
accompanying your Form 1040 federal tax return.


The Social Security Disability Income (SSDI) program pays cash benefits to
people who are unable to work for a year or more because of a disability.
Benefits continue until you are able to work again on
a regular basis, or until you reach retirement age. At that point, the disability benefits automatically
convert to retirement benefits, but the amount remains the same. After receiving
SSDI benefits for two years, you also become eligible
for health insurance coverage under Medicare. The disability program also
includes a number of work incentives to ease your
transition back to work. As of September 2000, some 6.6 million disabled workers
and their dependents were receiving benefits through the program.

Who is eligible?
As with retirement benefits,
must have accumulated a certain number of work credits before you can qualify for disability benefits. However,
fewer credits are required to qualify for the disability program than for
retirement. You can earn up
to four credits per year of employment. How many credits you need to qualify for
disability depends on the age you become disabled.

Before age 24
You may qualify if you have six credits earned in the
three-year period ending when your disability starts.

Age 24 to 31
You may qualify if you have credit for having worked half
the time between age 21 and the time you become disabled. For example, if you
become disabled at age 27, you would need credit for three years of work (12
credits) out of the previous six years (between age 21 and age 27).

Age 31 or older
In general, you will need to have accumulated the
number of work credits shown in the chart below. Unless you are blind, at
least 20 of the credits must have been earned in the 10 years immediately before
you became disabled. If you are disabled by blindness, your work credits can be
from any time after 1936.





















































        After 1929, Become
        Disabled At Age
        You Need
        through 42
        or older


Certain members of your family may qualify for
disability benefits on your work record should they become disabled. The amount
of these benefits depends on your earnings record. These family members


  • Your spouse who is age 62 or older, or any age if
      he or she is caring for your child who is under age 16 or disabled and also
      receiving checks;

  • Your widow or widower or divorced spouse (if the
      marriage lasted at least 10 years) age 50 or older should he or she become
      disabled. The disability must have started before your death or within seven
      years after your death;

  • Your unmarried son or daughter, including an
      adopted child, or, in some cases, a stepchild or grandchild.

When is a child entitled to disability benefits?
Children under age 18 who are disabled may be eligible for childhood
disability benefits if their parents have a disability or are deceased
and were insured at the time of death. An unmarried disabled child who
is older than age 18 may be eligible for benefits if the disability
began before age 22. There is no upper age limit for childhood
disability benefits.

addition, unmarried children are entitled to child’s insurance benefits
on the Social Security record of their disabled or deceased parents if
the child is under age 18 or between age 18 and 19 and a full-time

Who is "disabled"?
Social Security uses a strict definition of
disability. The program does not pay for partial disability or short-term
disability. To qualify for Social Security benefits, your disability must
prevent you from doing any substantial gainful work, and it must last or be
expected to last a year or to result in death.

Despite the rule that the disability must be expected
to last a year, you should apply for benefits as soon as the condition becomes
disabling and your doctor is willing to state in writing that it is expected to
last at least a year. If it turns out that you recover sooner than expected,
Social Security will not ask for its money back.

Older workers who become disabled tend to have an
easier time having their claims approved. The SSA recognizes that it is more
difficult for older workers to be retrained or to find new employment. In
addition, the agency knows that a disabled worker who is, say, 60 years old and
will be receiving retirement benefits in a few years anyway will cost it less in
benefit outlays than a younger worker would.

The amount of disability payments
As with other Social Security benefits, the amount of
your disability payments is based on your age and your earnings record. The
calculations are the same as those for retirement benefits, although fewer work
credits are needed to qualify for benefits. You can obtain the SSA’s estimate of
what your disability benefits would be by requesting Social Security Statement
SSA-7004 (formerly known as the Personal Earnings and Benefit Estimate
Statement) from the SSA. You can request a copy by mail or online by
visiting the following page on the SSA Web site:

Your spouses and minor or
disabled children are also eligible for benefits. The most that you and your family can
receive, however, is either 85 percent of your salary before you became disabled or 150 percent of
your own
disability benefit, whichever is less.

In most cases, the SSA allows you to supplement your
benefits with a small amount of income (in 2007, up to $900 a month or $1,500 for the blind).

Beneficiaries who are eligible for more than one
Social Security program — say, disability and retirement benefits — cannot
collect more than one Social Security benefit simultaneously. If you are
eligible for two benefit programs, you will receive the higher of the two
benefit amounts, but not both. The exception is Supplemental Security Income,
which you can receive while collecting benefits from another Social Security
program. However, you are permitted to collect disability payments from a
private insurer, the Veterans Administration, or other source at the same time
that you are receiving Social Security disability benefits. This holds true for
workers’ compensation benefits as well, although your Social Security disability
benefits will be reduced if the total of your workers’ compensation and
disability benefits exceeds 80 percent of your average wages before you became

Applying for benefits
Unlike applying for retirement benefits, the
application process for disability benefits is complicated and time-consuming.
Before you can collect benefits, you have to have been disabled for at least six
months. However, since the application process itself can take up to six months,
do not wait for the six-month period of disability to elapse before applying for
benefits; do it as soon as you become disabled.

The initial application is made at your local Social
Security Office. (Don’t know where your local office is? Click here for the
SSA’s Social Security Locator.) If the office determines that you have sufficient work credits to
collect disability benefits, it will forward your application to a Disability
Determination Services office in your state, which will make the decision about
whether you meet Social Security’s criteria for disability. This decision is
made by a doctor and a disability evaluation specialist. They may request
additional medical records and/or request a medical evaluation or test. This
exam will be paid for by Social Security.

Social Security decisions

If your application for benefits is denied or you are
receiving less than you believe you deserve, you can appeal. Appeals are most
common with disability claims. A large percentage of decisions are changed in
the appeal process. For example, almost half of all disability claim appeals are
resolved in favor of the beneficiary. There are four stages of the appeal
process, and you must go through each before you can move to the next. They are:
request for reconsideration, a hearing before an administrative law judge (ALJ);
a request for review of the ALJ’s decision by the Social Security Appeals
Council in Washington, D.C.; and, finally, a lawsuit filed in federal court. At
each stage in the process, you have 65 days from the date on a written notice of
the Social Security’s decision at the previous stage to let the SSA know that
you are appealing to the next stage

  about Social Security

If you are wondering about your future Social
Security benefits, you are not alone. Social Security is a strange political
animal. On the one hand, it is politically sacrosanct — both Democrats and
Republicans have kept it off-limits in their efforts to balance the federal
budget. At the same time, when polled, most younger Americans say that they do
not expect Social Security to be around for them when they retire.

Both attitudes towards Social Security reflect
misunderstandings about the program’s funding. Those without faith in the
program should be assured that it will be around to contribute to the
retirements of today’s workers, even if no one should depend on it as his or her
sole retirement income.

Myth 1: The Social Security ‘Trust

Although the Social Security Administration measures
its surplus or deficit in terms of a "trust fund," in fact no such entity
exists. As a result of this terminology, most Americans believe that their
payroll taxes go into an account to be drawn on when they retire. In fact, their
taxes simply go to pay benefits to current retirees, with the surplus going to
pay other costs of government.

Currently, the payroll tax is bringing in more than
is necessary to pay current retirees and those on disability: In 1999, there
were revenues of $527 billion and distributions of $393 billion, resulting in a
$134 billion surplus. The federal government keeps track of the surplus and in
effect signs an IOU to repay the Social Security system with interest when

Myth 2: Workers get less out of the system than they
paid in

While the current Social Security payroll tax is 15.3
percent on income up to $97,500 a year (2007 figure), the tax rates and the wage base were
much lower when most current retirees were working and contributing to the
system. As recently as 1972, the maximum payroll tax paid (by the employee) was
only $419 a year. Even including interest earned since the contributions were
made, most retirees receive back significantly more than they

This may not be true for current workers, since both
the tax and the wage base upon which the tax is determined have increased
dramatically since the 1970s. Whether current workers will recover their entire
investment will depend in part on how long they live, whether they are married
and whether they earned a high or low wage.

Myth 3: The Social Security system is

Due to anticipated demographic developments, at some
time in the future Social Security benefits will exceed revenues from the
payroll tax. This means that benefits will have to be cut or postponed, or that
the difference will have to be made up from federal tax revenues, or both. The
federal government can’t go bankrupt like an individual or company. It must meet
its obligations, and it will do so. Additionally, dire predictions abut the
insolvency of the system fail to consider the possibility of immigration or
another "baby boom" increasing the number of wage earners in future years, or
the effect of an increasingly productive economy.

Myth 4: Proportionality

While most people expect to receive retirement
benefits proportional to their lifetime earnings, this is not exactly how Social
Security benefits are determined. In calculating a retired worker’s monthly benefit
check, the SSA determines a "primary insurance amount" (PIA)
based on the worker’s earnings over 35 years. But it weights the first few hundred
dollars of average monthly income highest, and income over $4,100 a month (in
2007) lowest. The result is that low-wage earners receive a higher benefit
relative to their lifetime earnings than do higher wage earners. (This is
somewhat offset by the fact that the payroll tax is based on only a portion of
the higher wage earners’ taxable income.)

Myth 5: The system favors two-income

While the system of determining the PIA may seem to
favor two-income married couples, in fact single-income married couples do
better in most cases. This is because spouses of retirees are entitled at a
minimum to one-half of the benefits of the retired worker. So, in effect, the
married worker with a non-working spouse receives 150 percent of the benefits
received by a non-married retiree with the same work history. A working spouse
must have an earnings history nearly comparable to that of the main wage earner
to receive benefits substantially exceeding what he or she would be entitled to
without having worked.

Myth 6: ‘I can invest better’

Many people feel that they could do better if they took their payroll tax (including the
employer’s contribution) and invested it on their own. That’s possible, but by
no means assured. As is discussed above, if you are married and the sole or
primary wage earner, it would be almost impossible to beat the extra 50 percent
of benefits that come to your spouse. In addition, any calculation must take
into account the disability benefits and programs for disabled children and
other dependants in measuring the return on the Social Security investment. Due
to the redistributive nature of Social Security, it would be very difficult for
lower-wage earners to do as well investing on their own.

Social Security also has the advantage of forcing
workers to save. You and your employer have to make the contributions each
month. It’s portable, meaning you lose nothing by changing jobs. It’s guaranteed
against bankruptcy or an employer misusing the funds. There’s no risk that
you’ll dip into the funds prior to retirement for other pressing needs. Finally,
for most Social Security beneficiaries, the monthly checks come tax free.
Finally, Social Security is not an investment program. It’s a system under which
current taxpayers support current retirees. If it is to be replaced with a
forced investment program, as some suggest, provisions need to be made for
today’s retirees.


In short, the Social Security system provides a
secure base income for most retirees, and it will continue to do so in the
future. Its redistributive nature benefits lower-wage earners at the expense of
higher-wage earners, but they and their employers contribute a higher proportion
of their earnings as well. Under any measure, most current retirees receive back
significantly more than they contributed. Due to significant increases in the
payroll tax and the wage base, this result cannot be assured for future
retirees. But that does not mean that the system is at risk of going bankrupt,
as many Americans fear.

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