Social Security was established with the passing of the Social Security Act of 1935 when the effects of: the Great Depression exposed the shortcomings of the patchwork of local, state and family networks for the care of the elderly.
Legislation passed by Congress and signed by Franklin D Roosevelt created much more than a federal support system for the elderly. The bill included unemployment insurance, benefits for victims of work accidents and assistance to their dependents, as well as financial aid for the blind and physically disabled.
The Three Social Security Programs
The Social Security Administration oversees the Old Age, Survivor, and Disability Insurance Program (OASDI), best known for providing retirement benefits to seniors, but as the name implies, it also offers survivor benefits and disability income. Employees pay in the system through a payroll tax called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA).
During any given year, a contributor to the Social Security program can earn up to four credits. To be eligible for a retirement benefit, you must earn 40 credits, but there is a different calculation for dependents and disabled beneficiaries. The amount you receive in benefits and what you pay per credit changes each year based on the annual cost of living adjustment (COLA).
in 2021, one credit is awarded for every $1,470 of covered earnings up to a maximum of $5,880, which is equal to four credits. During a lifetime of employment you may be able to earn more credits than the minimum, but this will not affect the benefits you receive. The funds collected from FICA and SECA go to two social security trust funds, one for the elderly and survivors, the other for benefit claimants, that are used to pay benefits.
Social Security benefits for the elderly
As mentioned before, you must earn a minimum of 40 credits to be eligible for old age benefits, but exceeding that number does not translate into a higher payout when you start collecting on what you put in your jar. Old age benefits are based on your income statement, the Social Security Administration averages your 35 highest-earning years along with other factors to calculate your monthly benefit when you apply.
You can start collecting benefits at 62, since you have earned enough credits, but the longer you work, the higher your potential payout when you apply for benefits. Waiting until full retirement age (FRA) will significantly increase the amount you can claim, that’s 66 for people born in 1954, then it gradually increases by two months for each year until 1960. For those born in 1960 and after full retirement age, it’s 67, but you’re not getting your maximum benefit possible unless you work until 70.
Survivors’ benefits from social security
Survivors’ benefits for a contributor’s family members depend on the age at which that employee died, with fewer credits required, the younger the employee dies. The Social Security Administration has a special rule where the surviving children and the spouse caring for the children can receive survivor benefits after the employee has only obtained six credits in the three years prior to his or her death.
The Social Security Administration will continue to pay dependents of someone who was already receiving retirement or disability benefits at the time of death, based on that entitlement.
Social Security Disability Insurance
Those who are blind or have disabilities can access potentially two different programs if they meet the criteria.
Social Security Disability Insurance (SSDI) is available to people who are registered as disabled and unable to work due to their physical or mental disability that is expected to last a year or more, or result in death. Recipients must meet certain work history requirements, but family members can also be used to meet the requirements, which would be difficult for many born with disabilities to achieve.
There is also Supplemental Security Income (SSI) which provides financial support to people with disabilities, along with seniors, who have limited incomes. Most states have their own support programs to help people on SSI benefits.