Social Security — A retirement income supplement to your own savings

Social Security was created in 1935 during the Great Depression as part of President Franklin D. Roosevelt’s New Deal plan. Today it is one of the largest government programs in America. Its focus is to help protect retired and disabled workers from falling into poverty. The program was never intended to provide retirees with 100 percent of their retirement income. Rather, it was designed to supplement other sources of retirement income, such as pensions and personal savings.

The entire program is funded by a payroll tax on current workers’ wages. You’ll recognize this as the FICA (Federal Insurance Contributions Act) deduction on your paycheck. You pay a portion of the tax and your employer pays the other portion.

Who qualifies and how much do you get?

Social Security provides monthly income that's adjusted each year for inflation. To qualify for the retirement benefit, you must:

• Accumulate enough Social Security credits, generally by working for at least 10 years with earnings of at least $1,470 (per credit) as of 2021. You must earn at least $5,880 to get the maximum of four credits for the year.
• Be age 62 or older, disabled, or blind
• Apply for the benefits (Social Security benefits are not automatic — you can apply online).

You can choose to start receiving reduced benefits before your full retirement age (this age varies depending on your date of birth). Waiting until after your full retirement age will increase the monthly benefit. Since a portion of your benefit may be taxed as income, you may want to talk with your tax professional before deciding when to start taking benefits.

The benefits formula has changed over the years, but generally the lower your average salary, the higher the percentage of your preretirement income that Social Security will replace. To estimate your retirement benefit, enter your information in the Social Security Administration’s Retirement Estimator.

Take control of your retirement income

The Social Security Administration estimates that in 2021, about 65 million Americans received benefits totaling over a trillion dollars. Retired workers will receive an average monthly benefit of $1,544, which will represent about 33 percent of their income.² That’s about $18,500 a year. Clearly, you can’t rely on Social Security as your only income source in retirement. This is why it’s so important to save your own money. You may need a lot more than Social Security can provide to live the retirement lifestyle you want.

¹ Forty (40) credits are required to receive Social Security benefits for those born in 1929 or later. Credits are based on the amount of your earnings. In 2021, you receive one credit for each $1,470 of earnings up to a maximum of four credits per year. Source: SSA.gov

² SSA.gov — Social Security Basic Facts