social insurance

President Roosevelt signed the Social Security Act on August 14, 1935. Taxes were collected for the first time in January 1937, and the first one-time, lump-sum payments were made that same month. Under the law, Social Security paid retirement benefits to the primary worker only. A 1939 change in the law added survivors’ benefits and benefits for the retiree’s spouse and children. In 1956, disability benefits were added.

As an American, you earn Social Security credits when you work in a job in which you pay Social Security taxes. The credits are based on your earnings. During your working years, your wages are posted to your Social Security record, and you receive earnings credits based on those wages. These credits determine eligibility for retirement benefits or for disability or survivors benefits if you should become disabled or die.

Each year, the amount of earnings needed for a credit rises as average earnings levels rise. The maximum number of credits you can earn is four per year. The credits you earn remain on your Social Security record even if you change jobs or have no earnings for a while.

Special rules for earning Social Security coverage apply to certain types of work. If you are self-employed, you earn Social Security credits the same way employees do. However, special rules apply if you have net annual earnings of less than $400. If you are in the military, you earn Social Security credits the same way civilian employees do. You also may receive additional earnings credits under certain conditions. Other kinds of work also have special rules about how you earn credits. Some of these jobs are domestic work, farm work, or work for a church or church-controlled organization that has been exempted from payment of Social Security taxes.

The number of credits you need to be eligible for benefits depends on your age and the type of benefit. For retirement benefits, everyone born in 1929 or later needs 40 credits to be eligible for retirement benefits; people born before 1929 need fewer credits.

Given all of the press about governmental entitlement programs, and the possibility that Social Security will be unsustainable in 30 years, if you could make a change, what would it be (and why)?

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