Social Security is federal program funded by payroll taxes that provides income to retirees and workers who become disabled.
The Social Security program is supported by federal payroll taxes. If you receive a paycheck, your employer will withdraw a percentage of your earnings for Social Security. If you work for yourself, you will be responsible for paying these taxes. Self-employed individuals must record their earnings and pay their Social Security taxes to the IRS directly. These taxes will be used to establish your future eligibility for benefits.
Because Social Security payments are dependent on your job history, you may be ineligible if you haven't worked and paid into the system. Everyone should know whether they qualify or not. You can do this by creating your account on ssa.gov. Anyone born after 1929 must work for 10 years (40 credits) to be eligible for retirement benefits. When you pay Social Security taxes on a certain amount of money, you gain a work credit.
There have been concerns about the Social Security trust fund running out during the past 20 years. Efforts to "repair" the problem may mean that you will receive a less retirement income or that you would have to wait longer to collect it.
The full retirement age for Social Security, which determines when you may get the full amount of your retirement benefits, has already been increased from 65 to a maximum of 67, depending on the year of your birth.
Source: Social Security Administration
Chart: Women Financial Power social security display
Did you know that according to the Social Security Administration (SSA), this benefit was never intended to be a person's only source of income upon retirement?According to the SSA. Social Security replaces [only] about 40% of an average wage earner's income after retiring.
Think about where the money you need in retirement will come from if you don't receive income from a defined benefit pension plan and you can only replace around 40% of your income from Social Security, provided that program is still in existence at the time of your retirement.