Financial Literacy for Everyone

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Unless you are employed by a local or state government agency that opted out of the Social Security system, each of your paychecks has Social Security tax taken out of it. You may be wondering, where does this money go? It's collected into the Social Security Trust Fund, and then redistributed as retirement and disability income, as well as Medicare, Medicaid, death and survivorship benefits. The idea behind Social Security is simple: one-for-all, all-for-one. You pay into a system to sustain a common financial safety net that you can count on to eventually benefit from later in your lifetime.

Social Security

Is Everyone Guaranteed Social Security?
Not exactly. You receive Social Security credits based on your earnings. In 2016, you get one credit for every $1,260 you earn – that figure is adjusted higher each year – up to a limit of four credits per year. You need 40 credits, at least a 10-year work history, in order to be eligible to receive Social Security retirement benefits.

The Social Security Administration (SSA) reviews your income from your 35 highest-earning years to calculate your Social Security benefit. If you worked less than 35 years, then those years will count as zero. Continuing to work to replace years of lower or zero earnings can improve your benefits.

According to the Social Security Board of Trustees, as the baby-boom generation transitions into retirement, Social Security will soon start paying out more benefits than it receives in contributions. It is estimated that by 2035, there will only be enough money coming into the program to pay out about three-quarters of total expected benefits.

When Can I Start Receiving Social Security Benefits?
The soonest you can begin to receive Social Security retirement benefits is at age 62. You can receive the full retirement payout that you've earned by waiting until you've reached full retirement age, which is 67 for everyone born in 1960 or after. For every year after full retirement age that you delay collecting payments, your benefits payment goes up 8 percent, until you turn 70 – that's the longest you can delay. Consider consulting with a qualified financial planner to determine what is the best age for you to start collecting these benefits.

The SSA mails out a summary of your benefits each year. It includes a record of your earnings history, the number of credits you've earned to date and an estimate of the retirement benefits available if you wait until full retirement age. You can also request one by calling the SSA (800-772-1213) and asking for a SSA-7004 form, or by downloading this form. You can also access your personal Social Security information on the Social Security government website.

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