Page Reviewed / Updated – September 29nd, 2021

Social Security Benefits started as an anti-poverty program in 1935 and has grown over the years to provide income for retirees, disabled workers, families of deceased workers, and low-income seniors. Workers in the United States contribute to Social Security through automatic paycheck deductions and receive money back after retirement if they meet the program’s qualifications.

How Does the Social Security Program Work?

Collectively, the money paid into Social Security is delivered to qualified recipients, including retirees, those qualifying as disabled, a surviving spouse and dependents of beneficiaries. Unlike some retirement accounts such as a 401(k), Social Security isn’t held in a personal account in your name. Instead, the total amount of money paid into Social Security is pooled together to pay current benefit recipients with leftover funds placed in the Social Security trust fund set to pay up-and-coming retirees once they’re eligible.

Who Is Eligible for Social Security Benefits?

Throughout your career, a portion of your total income is taxed for the Social Security program. As you work, you start to earn credits toward future Social Security benefits. While every working American is taxed, not everyone is eligible for Social Security due to the number of credits required. Those born after 1929 need a total of 40 credits to access Social Security benefits payments. It takes approximately 10 years to gain the 40 credits. If you stop working prior to receiving the 40 credits, the total amount of earned credits remains on your Social Security record. If you don’t have enough credits and then return to work at a later time, more credits may be added.

At What Age Do Social Security Benefits Start?

Social Security benefits are paid out according to your retirement age. The full retirement age is 66 years old for those born between 1943 and 1954. If you were born after 1955, you have a full retirement age of 67. Those who choose to retire at that age receive the full retirement benefit amount. However, payments can begin as early as age 62 but are subject to a reduction in the total amount. Social Security benefits can also be delayed and continue accruing past the full retirement age up to 70 years old. However, you don’t gain further credit for delaying your retirement benefits after 67.

How Does Social Security Affect My Retirement Plan?

According to the United States Social Security Administration, Social Security replaces about 40% of pre-retirement income, so it’s not meant to be the only source used. Having an accurate estimation of future benefits can greatly impact the way an individual’s retirement goals are achieved. A common retirement goal among many Americans is planning for assisted living expenses. An estimation calculator is available to help with this process.