Monthly Social Security Retirement Benefits

Social Security is a federal government program to help people financially as they face retirement, disability, death and taking care of their survivors. As more of the nation's population moves toward retirement, it is important to understand how Social Security retirement benefits work, as well as the program's benefits and drawbacks and planning for retirement.

What is Social Security

The Social Security Retirement Fund is a social insurance program that every eligible working individual contributes to in the form of payroll deductions called FICA (Federal Insurance Contributions Act). A percentage of a person's paycheck is deducted from her pay and deposited into the program to keep the program funded. The retirement program began in 1935 during Franklin D. Roosevelt's presidency.

Function of Social Security

As payroll taxes are deposited into the retirement fund, that money is used to pay monthly Social Security benefits to current recipients. Keeping the program funded with payroll taxes is important to insure retirement benefits to future recipients. By the year 2042, all Social Security Benefits could be exhausted as fewer and fewer individuals contribute to Social Security through payroll taxes.

Significance

Approximately 32 million out of 47 million Social Security recipients are retired persons who receive monthly retirement checks. The other 15 million have either a disability, a surviving spouse or dependent children. Social Security retirement benefits are paid monthly to recipients in the form of a check or direct deposit. The amount will vary based on a percentage of a person's total lifetime income.

Calculation

Social Security recipients will receive approximately 40 percent of their total average wages that were earned from age 16 to 65. This is based in part by the amount of credits an individual earns during those years. For every $920 earned, one credit is earned up to a total of four for each year. Ten years of work or 40 credits are needed to be eligible for Social Security retirement. Fewer credits are needed if a person becomes disabled before retirement age or when a worker dies, in which the surviving spouse and any dependent children will receive that person's Social Security benefits.

Age at Retirement

Retirement age has been slowly rising since 2003, when the normal retirement age was 65. After 2003, it rises depending on the year you were born. For example, if you were born in 1950, full retirement is now 66 years. If you were born in 1960, full retirement age increases to 67. Early retirement can still be achieved at age 62 with a permanent reduction in benefits of approximately 0.5 percent.

Considerations

There are limitations to many benefits. A visit to the Social Security Administration's website is important for a full listing of requirements, benefits and limitations. In many cases, Social Security Income is not enough for an individual to live on. It is important for individuals to save as much money as they can while working to ensure enough income to live on after retirement.