Social security programs first appeared in Europe in response to families moving from farming to working for others as the world became industrialized.
Germany established the first social security program way back in 1889.
In the United States, the Great Depression triggered an economic crisis that caused millions of seniors to become impoverished.
President Franklin D. Roosevelt passed the Social Security Act in 1935 in an attempt to provide economic security for the elderly.
Who Pays for Social Security?
Social Security is not a federally funded program; it is funded entirely by payroll taxes. Employees and employers both contribute 6.2% of the worker’s earnings to Social Security, for a total of 12.4%.
Self-employed individuals pay both the employee and employer share.
Who Can Receive Social Security Benefits?
In general, the following people may qualify for Social Security benefits:
- Spouses of retirees
- Widows and widowers
- Dependent children of retired and deceased workers
- Disabled people
According to the Social Security Administration, about one in six people in the United States collects Social Security benefits.
While most of these are made up of retired workers (almost 40 million), about six million spouses and children of retired and deceased workers also receive benefits. Social Security also pays out disability benefits to approximately 10 million disabled workers, including their spouses and children.
Under the original Social Security retirement program, only workers received benefits , and only retirement benefits (there were no survivor or disability benefits under the original Social Security program). In 1939, the act was amended to provide benefits to spouses and children for both retired and deceased workers.
The monthly retirement benefit didn’t begin until 1940, and the first recipient was Ida May Fuller, a retired legal secretary. Ida May continued to receive benefits until she died at age 100.
Since then the program has been amended to include cost of living adjustments (COLAs), and disability benefits. Medicare wasn’t introduced until the 1960s.
When Can You Receive Social Security?
As I mentioned in Social Security Retirement Age: When Can You Retire?,
the original retirement age was 65 (there was no early retirement). The law was changed in 1956 to allow women to apply at age 62, under the assumption that wives were younger than their husbands and that they would want to retire at the same time.
I find it interesting that men were not allowed to apply for benefits at age 62 until the law was amended again in 1961. Of course, under the current Social Security system, both men and women can apply as early as age 62 or as late as age 70.
For people retiring now (born between 1943-1954), the full retirement age is 66. The full retirement age for people born after 1954 will gradually increase to age 67.
Early retirement age is still 62, however, your benefits will be reduced if you take them before your full retirement age. As the full retirement age increases, so will the penalty for taking benefits early.
The rules for survivors are a little different. Widows and widowers can collect survivor benefits as early as age 60. Similar to retirement benefits, survivor benefits will be reduced if you take them before you reach full retirement age.
In some cases, children may also qualify for Social Security. Unmarried children under the age of 18 (under the age of 22 if disabled) may qualify for benefits if a parent is deceased or even just retired.
There is no age requirement for disability benefits, however, they are in part based on how much you have worked, so you must be at least working age to receive disability benefits.
How much can you receive?
Retirement benefits are based on the number of years you have worked and the amount you earned (and thus contributed to Social Security) during those years.
To be more specific, your full retirement benefit (also called the primary insurance amount) is the average of your top 35 years of earnings.
You will receive the primary insurance amount if you retire at your full retirement age. If you collect benefits early the amount will be reduced for every month you collect before you reach full retirement age. This discount can be as high as 30% depending on your year of birth and how early you apply for benefits.
On the flip side, if you delay your benefits beyond the full retirement age, you will receive a larger amount. Your benefits will increase by 8 percent for each year that you wait to collect.
To see the full history of Social Security, please visit Social Security History.