Understanding Social Security and the Debt

Every week, you get a paycheck. And on your paystub, you see all kinds of taxes taken out; State and local stuff, federal stuff, all kinds of stuff. One of those items is social security. Now, a lot of us think we know what social security is: it’s what retired and disabled people get. But that’s only a small part of what it really is, and it really doesn’t attribute to a lot of our country’s debt, either.

Social security was written into law by Franklin Roosevelt in the 1930’s, and was only meant to benefit the employee. A few years after it was written, it was modified to include survivors that were related to a worker who had passed away.  So, it now includes children (under 18 unless they are severely disabled), spouses, and former spouses (if you were married 10 or more years) of workers who are now deceased (under the age of 18), the disabled, and those who are now retired.

Social Security used to be self-sustaining; it was estimated that there were about 40 working Americans for every person that was retired when the program was first created. Now, it is estimated that there are only 3-4 workers per retiree. This creates a severe deficiency, and unless the program is reformed, it will probably be gone within the next ten years. Social security is not meant to be the primary source of income after retirement. It only accounts for about 40% of your income before you stopped working.


Every worker pays approximately 6 percent of their income into social security. This 6 percent is then matched by the employer. Contrary to what many people believe, you do not have your own social security fund. 85% of the social security you pay in goes to fund current retirees, and 15% goes to help those who are on Social Security due to disability or other reasons.

The suggested age for current retirees to start receiving benefits is age 65. You can opt to begin your benefits at 62, but the check that you get monthly will be significantly lower than if you wait the extra 3 years. You can also wait until age 70, where your check will be a bit higher than it would at 65. For people who were born after 1960, you will now have to wait until age 67 in order to receive full benefits. You should apply for social security benefits about 6 months before you hope to begin receiving them, at about the same time you would be applying for Medicare benefits.

Contrary to popular belief, you can still work and receive retirement Social Security benefits. The government has a salary threshold (about $35,000 in 2010) where you do not get penalized for working and receiving benefits; for every $3 past that, you lose $1 in benefits. If you are not of retirement age, it’s for every $2 past the threshold that you lose $1. So, the mysteries of Social Security unraveled. It’s not just for retirees, and reform is necessary for the program to continue to be successful.