By Fiona Leung on Feb 9, 2019
Created as a result of the Great Depression, The Social Security Act was signed into law by President Roosevelt in 1935; mainly due to the rise in poverty of the nation’s elderly population. The act was designed to provide retired workers ages 65 and older with a continuing income after retirement. The first Social Security card was created in November of 1936, with the numbers assigned by geographic region. To date, more than 450 million Social Security numbers have been issued since the program started.
January 1, 1937, the U.S. government began the monumental task of registering employers and workers alike. FICA (Federal Insurance Contributions Act) taxes began to be collected at this time as well, with all contributions to be used towards payment of retirement benefits. Today, these contributions continue, with both workers and their employers required to contribute a combined 7.65 percent of their wages towards Social Security (6.2 percent), and Medicare (1.45 percent). While the cap for Social Security withholding is capped when earnings reach $128,400 annually, there is currently no earnings cap for Medicare withholding tax.
Eligibility for Social Security has changed over time. If you’re wondering when you’re eligible to begin to collect Social Security, here is the current breakdown:
- If you were born prior to 1938, you were eligible to collect full Social Security benefits when you turned 65
- If you were born between 1943 and 1954, your current retirement age is 66
- If you were born in 1960 or later, your current retirement age is 67
- You can begin to collect benefits at age 62 regardless of the year you were born, but your monthly benefit will be reduced considerably
- Waiting until the age of 70 to retire will significantly increase your monthly benefit
- Any Social Security benefits earned will have to be included in any taxable income that is reported to the IRS
- If you continue to work while receiving benefits, your monthly benefit will be reduced accordingly if you have not hit your retirement age
- Once you hit your retirement age, you can continue to work while collecting your benefit with no reduction
The Social Security Administration (SSA) provides a number of tools and a benefit calculator on their website that will show you your exact retirement age, based on the year you were born, as well as a retirement calculator that will provide you with a good estimate of what your monthly benefit will be once you retire. SSA also provides a copy of your earnings record, which shows you exactly how much you have earned over the years and what your estimated benefit would be. It’s important to check these earnings records periodically in order to determine if there are any errors that need to be corrected.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.