The Origins of Social Security Law
Social Security was introduced in 1935 under the administration of President Franklin D. Roosevelt as part of the New Deal. Its original aim was to mitigate the economic insecurity that many Americans faced during the Great Depression. The Social Security Act of 1935 created a social insurance program where workers, employers, and self-employed individuals contribute to the Social Security system through payroll taxes. These contributions are then used to provide financial assistance to beneficiaries. The program has expanded over the decades to include not only retirement benefits but also disability insurance (known as Social Security Disability Insurance or SSDI) and survivor benefits, which help family members of deceased workers.
How Social Security Law is Funded
The program is funded primarily through the Federal Insurance Contributions Act (FICA) tax, which is paid by both employees and employers. The self-employed pay a similar tax under the Self-Employment Contributions Act (SECA). Each worker earns credits toward Social Security benefits by paying these taxes, which are based on their income. Workers must earn at least 40 credits (equivalent to 10 years of work) to qualify for retirement benefits.
A portion of the payroll taxes goes to the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund, which support retirees, disabled workers, and survivors. Another portion is allocated to Medicare, the health insurance program for older and disabled individuals.
Social Security Retirement Benefits
The most well-known aspect of Social Security law is retirement benefits. These benefits provide monthly payments to individuals who have reached the required age and earned enough credits during their working years. The full retirement age (FRA) depends on the year a person was born. For those born in 1960 or later, the FRA is 67. Individuals can choose to start receiving benefits as early as age 62, but their monthly benefits will be reduced if they do so.
Alternatively, individuals can delay receiving benefits past their FRA and increase the monthly benefit they receive. For each year a person delays taking benefits beyond their FRA (up to age 70), they earn delayed retirement credits, which increase their benefit amount. This flexibility allows workers to decide when to start receiving benefits based on their financial needs and life expectancy.
Social Security Disability Benefits
Social Security law also provides benefits to individuals who are unable to work due to a disabling medical condition. Social Security Disability Insurance (SSDI) is designed for workers who have paid into the system through their FICA or SECA taxes but have become disabled before reaching retirement age. To qualify, the individual must meet the Social Security Administration’s (SSA) strict definition of disability, which requires that the condition be severe enough to prevent the person from performing any substantial gainful activity and last (or be expected to last) for at least one year or result in death.
SSDI applicants must also have earned enough work credits prior to becoming disabled. The number of required credits varies based on the individual’s age at the time of disability. If approved, SSDI beneficiaries receive monthly payments based on their average lifetime earnings, and after two years of receiving SSDI benefits, they are automatically enrolled in Medicare.
Supplemental Security Income (SSI)
In addition to SSDI, Social Security law also includes Supplemental Security Income (SSI), a needs-based program for individuals who are aged, blind, or disabled and have limited income and resources. The self-employed pay a similar tax under the Self-Employed Contributions Act (SECA), which ensures that everyone who works contributes a portion of their earnings to Social Security.
Social Security law forms the backbone of financial protection for millions of Americans, providing essential income for retirees, the disabled, and survivors of deceased workers. Its structure, funded by payroll taxes, creates a reliable and consistent support system for those who meet the eligibility criteria. Although complex, the Social Security system plays a vital role in the social fabric of the United States, offering security and dignity to individuals in times of need. Understanding its nuances is critical for individuals seeking to maximize their benefits or navigating life’s uncertainties.