Financial Advice

Be a Wise Consumer


Social Security 101: The Basics

Social security: It’s that thing we hear about — and pay into — our entire working careers. But what do you really know about social security? Here’s the 4-1-1 on this longstanding government program.

How Did Social Security Begin?
President Franklin D Roosevelt signed the Social Security Act in August 1935, creating the Social Security Administration. Workers began paying social security taxes in 1937, and the regular ongoing monthly benefits began the next year.

Give us a call, or visit your local branch anytime to chat with a personal financial representative.

Who Receives Social Security Benefits?
Social security never was intended to meet a person’s entire retirement income needs. Yet, today one-third of retirees rely on it for 90% of their income. For the majority of retirees, Social Security accounts for at least half of their retirement income. In addition, Social Security provides benefits for more than just retirement. It also provides income for workers who become disabled and for families in which a working spouse or parent dies. More than 62 million people currently receive social security benefits.

Who Funds Social Security?
Social security is funded through the taxes that we (as US workers) pay into the system. Currently, that amounts to about 175 million people. But don’t think that those withholdings you see on your paycheck are being earmarked especially for you. Instead, the taxes you are paying go to retirees and other beneficiaries who currently receive benefits. About 85% of every dollar you pay goes toward monthly benefits for current retirees and to surviving spouses and children of workers who have died, according to the Social Security Administration. The remaining 15 cents help cover benefits for people with disabilities and their families.

How Do I Get My Money Out of Social Security?
As you work and pay Social Security taxes, you are building “credits” in the program. You’ll have to work at least 10 years to build up the 40 credits generally necessary to become eligible for retirement benefits. The Social Security Administration increases the amount of money it takes to earn one credit annually. This year, for example, you will earn one credit for each $1,360 in earnings, up to a maximum of four credits.

The benefits you eventually receive from social security is based on your highest 35 years of earnings. So generally, working longer can replace lower-earning years and thus increase your benefits. If you have years in which you had no social security earnings, working longer can help turn those “zero years” into years with earnings.

How Much Can I Expect to Earn?
That depends on when you choose to start receiving benefits and your income (over those highest 35 years of earnings). You can begin taking benefits at age 62, although they will be reduced a half percent for each month you begin before your full retirement age. If you choose to postpone benefits until your full retirement age or beyond, your benefits will increase. According to the Social Security Administration, the maximum monthly social security benefit for a worker retiring at full retirement age in 2019 is $2,861.

What Exactly Does “Full Retirement Age” Mean?
Full retirement age is the age at which you can receive your full retirement benefits. You can begin to receive your full retirement benefit between ages 66 and 67, depending on when you were born. Taking benefits before this date will result in lower benefits; waiting longer will help your benefits grow. Use the chart from the Social Security Administration to determine your full retirement age.

Year of Birth Full retirement age
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67


Social Security benefits can be a valuable component of your retirement plan. It’s important to understand how they are calculated and how you can maximize them.