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What Is the Social Security Administration? | Social Security
Almost all working Americans eventually receive Social Security benefits. These funds are collected and distributed by the Social Security Administration, a federal agency that serves to fight poverty. The SSA’s programs pay benefits to almost 67 million people, including retirees, children, widows, widowers and those with disabilities.
As you manage your finances and prepare for retirement, it can be helpful to understand the workings of the SSA, including the following:
- Introduction to the Social Security Administration.
- History of the Social Security Administration.
- Functions of the Social Security Administration.
- How the Social Security Administration works.
- Role of the Social Security Administration in the U.S. economy.
- Challenges of the Social Security Administration.
- The future of Social Security Administration.
Introduction to the Social Security Administration
Aside from assigning Social Security numbers, the SSA administers the Retirement, Survivors, and Disability Insurance program, which provides monthly benefits to retirees, widows, widowers, dependents of eligible workers and disabled workers. It also operates the Supplemental Security Income program and enrolls individuals in Medicare. The SSI program sends monthly benefits to individuals with limited resources who meet certain requirements.
History of the Social Security Administration
The Social Security Administration formed in 1935. During its initial years, the SSA paid benefits to retired workers age 65 and older. In 1939, the agency added benefits for spouses, minor children and the survivors of deceased workers. With this change, the SSA shifted from being a retirement program to a family-based support system. Disability benefits began distribution in 1956.
The Medicare bill was signed in 1965, and the SSA launched a social insurance program to extend health coverage to individuals 65 or older who qualified. In 1972, the SSA began overseeing the Supplemental Security Income program. Automatic cost-of-living adjustments, or COLAs, were introduced in 1975.
Functions of the Social Security Administration
Here’s a closer look at the SSA’s major programs:
Social Security retirement benefits. This program focuses on providing Americans with income after retirement. For those who have paid into the system, SSA issues monthly payments based on their 35 years of highest income. You can choose to take Social Security at your full retirement age, which for many people is age 66 or 67. You also have the option of taking it as early as age 62 or as late as age 70. “When to start taking one’s Social Security benefit is one of the biggest decisions most will make in retirement,” Tim Wood, certified financial fiduciary and founder of Safe Money Retirement in Johnson City, Tennessee, said in an email. The right time to begin benefits depends on your health, working preferences, earning level and lifestyle choices in retirement.
Social Security disability benefits. Social Security Disability Insurance gives benefits to workers who become disabled and can no longer work. The program also provides for the dependents of disabled workers and aims to replace some of the income lost because of the disability. There are rules and criteria you need to meet to be eligible for Social Security disability benefits, and you’ll need to show supporting medical evidence for your condition. A “less known program is the childhood disability benefits, which allows individuals to receive benefits on their parent’s account so long as their disability begins before the age of 22,” said Andrew November, a disability attorney at Liner Legal in Cleveland, in an email.
Social Security survivor’s benefits. A spouse and other family members of a worker who passed away may be eligible for Social Security survivor benefits. A widow or widower who is at least age 60 (or 50 and older if they have a disability) or a surviving divorced spouse could receive survivor benefits. This program also supports widows and widowers who are raising the deceased’s child, if that child is under age 16 or has a disability, and unmarried surviving children who are age 19 or younger and full-time elementary or secondary students or who have a disability that began before age 22. A stepchild, grandchild, step-grandchild, adopted child or dependent parents could be eligible in some instances. If you were living with a spouse who passed away, you could also be paid a lump-sum death payment of $255.
Medicare. This government program provides health insurance for people age 65 and older. The Centers for Medicare and Medicaid Services is the federal agency in charge of the Medicare program, but the Social Security Administration handles enrollment in Medicare Parts A and B, and premiums can be withheld from your Social Security checks. If you sign up for Social Security before age 65, you may even be automatically enrolled in Medicare.
Supplemental Security Income. Individuals who are disabled and have limited resources may receive assistance from this program. It is also available to people 65 and older who are not disabled but have limited income and resources.
How the Social Security Administration Works
Taxes fund the agency, and Social Security payments are sent out to qualifying Americans. To receive benefits, you’ll need to fill out an application. Once you’ve been approved, you can expect to receive payments.
There are several ways to get in touch with the Social Security Administration if you have a question or concern about your benefits. You can call 1-800-772-1213 between 8 a.m. and 7 p.m. local time, Monday through Friday, to speak to a representative. There are also automated telephone services that you can reach 24 hours a day. In addition, it’s possible to visit a local Social Security office in your area and make an appointment to speak to a representative about your situation.
Role of the Social Security Administration in the U.S. Economy
Employers and workers pay into the Social Security program through a federal payroll tax called FICA, or the Federal Insurance Contributions Act. The current payroll tax rate requires both companies and employees to contribute 6.2% of wages up to a certain limit, which is $168,600 for 2024. Self-employed individuals pay 12.4% of their earnings into the Social Security program.
Challenges of the Social Security Administration
While the benefits you receive could cover some of your expenses, you may need to draw from savings to pay for the rest. You might also choose to work and earn extra income. However, you could face some limits to what you can earn in wages and still receive benefits. For retirees, “working while you collect Social Security is permitted but may be subject to a penalty if you are below your full retirement age,” said Joseph Favorito, a certified financial planner and managing principal at Landmark Wealth Management in Melville, New York, in an email. Your benefits could also be subject to taxes, depending on your level of income and where you live.
The Future of Social Security Administration
There are ongoing discussions about the future solvency of the SSA. The Social Security Board of Trustees projects program costs to rise by 2035 to the extent that taxes will support 75% of benefits, according to Stephen C. Goss, the chief actuary of the SSA. Possible changes to the funding sources for the SSA could have an impact as well.
