Social Security
A federal program providing retirement, disability, and survivor benefits funded by payroll taxes.
What is Social Security?
Social Security is a federal social insurance program administered by the Social Security Administration (SSA). It provides monthly benefits for retirement (at age 62–70), disability (SSDI), and survivors of deceased workers. Funded by FICA payroll taxes (6.2% from employees and 6.2% from employers on wages up to the annual taxable maximum), benefit amounts are based on a worker's 35 highest-earning years. Claiming at 62 results in a permanent 25–30% reduction from the full retirement age benefit; delaying until 70 increases benefits by 8% per year above full retirement age. Social Security replaces roughly 40% of pre-retirement income for average earners.
Example
A worker with an average indexed monthly earnings record qualifying for an $1,800/month benefit at full retirement age (67) receives $1,350 if claimed at 62, or $2,232 if delayed until 70 — an 8-year breakeven calculation on when to claim.
Source: Social Security Administration