In 2019, 64 million people collected monthly Social Security benefits. It’s one of the oldest and most efficient social programs in the U.S. (created in the 1930s). While all American workers pay into it, many don’t really know what this program does or how it benefits them.
What exactly is it?
Social Security is a government programme into which we all pay when we work. It pays you monthly rewards if and only if you:
- Disable yourself
- You’ve lost a spouse or a parent.
You earn Social Security credits by working and paying taxes. As of 2020, you will receive one credit for every $1,410 earned. Each year, you can earn up to four credits.
It benefits only replace a portion of your earnings. The amount you receive is determined by how much you earned over your career.
Should you be concerned about Social Security running out?
Payroll taxes are used to fund Social Security. The programme will not run out of funds as long as companies and employees continue to pay payroll taxes.
These taxes are paid by everyone, including self-employed individuals.
Nonetheless, the initiative has funding challenges. Social Security collected more than it gave out until 2019. However, it is presently paying out more than it is receiving. This is due to an increase in the number of retirees.
People are living longer lives and retiring in greater numbers.
The surplus in it is expected to run gone by 2035. It can only pay out 79% of the scheduled benefits at this point.
This isn’t the first time the programme has run into financial difficulties. To keep the programme going, Congress raised the retirement age, increased the payroll tax rate, and placed an income tax on benefits in 1983.
Similar moves may be taken by Congress in the coming years to address present funding issues. Otherwise, it may be significantly underfunded in the foreseeable future.
Can Social Security Actually Help You?
Yes. If your spouse passes away or you become handicapped, Social Security payments might help you get back on your feet. Every year, almost 10 million handicapped employees and their family receive these payments.
If you are at or nearing full retirement age, you can utilise your monthly benefits to supplement your income.
Benefits are guaranteed every month, ensuring that you always have a steady source of income.
However, you should not rely on it as your sole source of income after you retire. Instead, it is critical to contribute to a retirement plan while still working, such as:
- IRA account
- 401(k) plan
Contributing to a retirement plan ensures that you will have savings when you reach retirement age. Whether or whether Social Security is still available, you will be financially secure.