What Exactly Are Social Security Benefits?
Retired workers and their spouses who have made payments to the Social Security system during their working years are subject to Social Security benefits every month. Social Security benefits may also be given to individuals who are completely and permanently disabled and qualify by adhering to certain and rigorous criteria from the Social Security Administration.
BREAKING DOWN ‘Social Security Benefits’
Social Security benefits could be taxable, but that depends on a taxpayer’s level of income. As of 2016, taxpayers who don’t have a spouse and earn an annual income over $25,000 could have some of their Social Security benefits taxed. Also, married couples that file jointly and earn an exceeding $32,000 annually could also have Social Security benefits taxed. Typically, benefits received as a result of disability are tax-free.
The History of Social Security
The United States’ Social Security is formally known as the Old-Age, Survivors and Disability Insurance (OASDI) federal program. President Franklin Roosevelt signed the first Social Security Act into law during 1935. The current law, after several amendments, includes a variety of social insurance and social welfare programs such as the issuance of Social Security benefits.
The payment of retirement, or Social Security, benefits are the biggest part of OASDI. These benefits, a form of social insurance, are primarily biased towards workers at the lowest end of the income bracket in the hopes of preventing such families and individuals from retiring into poverty.
How It Works
Social Security and any benefits given are funded from payroll taxes under the Federal Insurance Contributions Act (FICA) tax or the Self Employed Contributions Act (SECA) tax. The Internal Revenue Service (IRS) collects taxes and delegates them to one of the collective groups towards Social Security trust funds. This group includes the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, the Federal Supplementary Medical Insurance Trust Fund and the Federal Disability Insurance Trust Fund. Without little, if any exceptions, the Social Security Administration and the IRS determine each worker’s income, throughout their career, and utilize FICA or SECA tax payment on such earnings.