The Social Security program provides retirees and the disabled with income after retiring or to persons unable to work. The program is administered by the United States government, which keeps records of the amounts paid into the program by each individual and utilizes this information to determine how much a person receives in benefit amounts when that person decides to start collecting Social Security.
Social Security was established in 1935 under President Franklin Roosevelt's administration. As a reaction to the Great Depression, which spawned widespread economic hardship throughout the United States, Social Security benefits were a way to ensure that elderly Americans would have a source of income after retirement. Social Security benefits are also available to the disabled before standard retirement ages; this account for about one in three Social Security recipients.
Social Security benefits are funded through payroll taxes deducted from an employee’s paycheck and goes directly to funding for current Social Security recipients. A retiree can begin collecting Social Security as early as age 62. About nine out of 10 retirees receive Social Security benefits.
If you were born in 1950 and retired by age 62, estimated Social Security benefits would be $938, by age 66, earnings would be $1,297; and by age 70, earnings would be $1,779, calculated in today’s dollars based on annual income of $40,000. Social Security Administration provides online calculators to estimate benefits at by inputting yearly earnings and desired retirement dates. Estimates can be given in today’s dollars or future dollars estimates. Waiting until 70 to collect Social Security benefits significantly increases the payout amounts.
Social Security can be awarded to those who are still working, but with stipulations. If a recipient has reached the full retirement age--which varies by your year of birth--benefits can be awarded and earnings from other sources of income will not affect benefit payments. If a recipient is younger than the full retirement age, full benefits can still be collected as long the other source of income does not exceed a level predetermined by the Social Security Administration.
Two-thirds of Social Security recipients rely on benefits as a major portion of supplemental income, and one third rely exclusively on benefits as the sole source of income.