How Does Social Security Work for Retired People?

What Is Social Security?

• Since Social Security was established under the New Deal in 1935, millions of Americans have depended on its benefits to live out their retirement years comfortably and in good health. However, there are few people who fully understand the dynamics of the program and how it is really set up to assist---not support---citizens and U.S. residents after retirement.
  
  How Social Security generally functions, as well as its long-term feasibility, has been a cause for debate for decades. Experts argue that the program has run its course and that it will be only a matter of time before its funds are completely consumed. However, as long as individuals continue to work and pay taxes, credits will be applied toward their Social Security earnings for the foreseeable future. As of 2009, a credit is earned for every $1,090 in earnings. These earnings are credited to the insurer's account, but are given---in the meantime---to individuals currently accepting Social Security earnings, such as retirees, the disabled and survivors of workers who have died.
  
  Currently, Social Security is putting out more money than it is bringing in. This has been a cause for concern for a few decades, with some experts doubting that it will be able to continue much longer. Currently, the excess money that the government collects is applied to U.S. Treasury bonds, which are then reapplied and owed to the government. Whether or not this will work in the future is a cause for concern.
  
  

Application Process & Eligibility

• Although the Earliest Eligibility Age (EEA) for retirement benefits is 62, there are some added benefits for those who wait until the full retirement age of 66. If an individual decides to wait, the benefits, calculated based on income while working, will be increased by a certain percentage. The same rule applies if the benefits are deducted earlier; approximately one-half to one percent will be deducted for each month before the full retirement age. So if the full retirement age is 66 (this is based on the year the individual was born, prior to 1938), but retirement is requested at the age of 62, then the total amount due will be decreased by 75 percent. Therefore, it may be worthwhile to wait until the full term. Since these benefits are progressive and adjusted to keep pace with inflation, it is best to attain the full amount to maintain a reasonable lifestyle.
  
  Establishing eligibility is one of the simplest part of the process. The usual proofs of identity (Social Security card, birth certificate, W-2 form) are necessary for the retiree and family members. Once these documents are provided, the process is fairly quick and simple. If some of the documents needed to complete the application are missing, the Social Security office can assist in attaining the remaining forms.
  
  

Beyond Retirement

• For nearly half of older Americans, Social Security benefits are the main source of income. It counts for about 41 percent of the income of people currently over the age of 65. Social Security benefits are guaranteed for life, but are not guaranteed to provide a critical income support. The program was intended to serve as a foundation for retired workers, not as their only source of income. Although after retirement it replaces about 40 percent of an average wage earner's income, most experts agree that 70 percent or more is needed to provide a comfortable living. Despite the Social Security benefits, Americans must also look into private pensions, savings and investments.