Social Security
Definition
Social Security is a federal program that provides retirement, disability, and survivor benefits to eligible workers and their families.
Explanation
Workers earn Social Security credits by paying payroll taxes (6.2% from employees, matched by employers). Benefits are calculated based on your 35 highest-earning years. Full retirement age ranges from 66 to 67 depending on birth year. Claiming early (62) reduces benefits by up to 30%; delaying to 70 increases benefits by 8% per year.
Social Security was designed to supplement retirement savings, not replace them entirely. It typically replaces about 40% of pre-retirement income.
Example
A worker retiring at full retirement age in 2024 with average lifetime earnings receives approximately $1,900 per month in Social Security benefits.