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Social Security Basics
Social Security is a national program of income protection. It was never supposed to be a personal savings plan in which workers invest their money in hopes of developing a nest egg for retirement. Instead, Social Security is based on the idea that if workers pool a portion of their wages, they will be able to protect each other and their families against catastrophic wage loss due to death, disability or retirement. Benefits create a dependable income floor and are meant to complement pensions and personal savings.Social Security has succeeded — paying benefits every single month for over 60 years — because it is:
Universal:
Nearly all American workers participate in Social Security, with contributions matched by their employers;
An
earned right:
Benefits are directly related to lifetime earnings and are guaranteed by the U.S. government to all contributors who meet the eligibility criteria;
Progressive and fair:
The formula is weighted so that the lowest-wage workers receive benefits that replace a larger percentage of their pre-retirement earnings, while the highest-wage/highest-contributing workers receive benefits in the largest dollar amounts;
Flexible and portable:
The system permits early retirement with actuarially reduced benefits, and participation in Social Security follows from job to job;
Cost-effective:
Because nearly all Americans participate in the same public system, Social Security’s administrative costs are less than 1 percent of benefits paid; and
Good,
basic coverage:
When workers die, Social Security provides basic income for their families; the same is true when workers become disabled. And when a worker retires, Social Security means a reliable income for both retiree and spouse, with full, annual cost-of-living adjustments (COLAs).
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