Social Security

The purpose of Social Security is to provide for the material needs of individuals and families, to protect aged and disabled persons against the expenses of illnesses that may otherwise use up their savings; to keep families together; and to give children the chance to grow up healthy and secure.

As I write this term paper, I will discuss the following topics, related to Social Security:
1.A brief history of Social Security.

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2.Types of Social Security benefits.

3.How Social Security is financed.

4.How you earn Social Security work credits.

1.A brief history of Social Security:
06/08/34Federal legislation to promote Economic Security was recommended in President Franklin D. Roosevelts message to Congress.

06/29/34President Roosevelt created the committee on Economic Security to study the problems related to economic security and make recommendations for a program of legislation.

01/17/35The Committee on Economic Securities recommendations were introduced in the 74th Congress.
04/19/35The Social Security Act was passed in the House of Representatives by a vote of 372 to 33.

06/19/35The Social Security Act was passed in the Senate by a vote of 77 to 6.

08/14/35The Social Security Act became law with President Roosevelts signature.

08/23/35The Senate confirmed the presidents nomination of the original members of the Social Security Board, John G. Winant, Chairman, Arthur J. Altmeyer, and Vincent M. Miles.
10/14/36The first Social Security field office was opened in Austin, Texas.
11/09/36The Baltimore Office for Record Keeping Operations opened in the Candler Building.

11/24/36Applications for Social Security account numbers were distributed by the post office.
01/01/37Workers began to acquire credits towards old-age insurance benefits.
01/37First application for benefits filed by Ernest Ackerman, a retired Cleveland motorman who received a lump sum payment of 17 cents. The average lump sum payment during this period was $58.06. The smallest payment ever made was for 5 cents.

08/10/39The Social Security Amendments of 1939 broadened the program to include dependents and survivors benefits.

01/31/40Ida Fuller became the first person to receive an old-age monthly benefit check in the amount of $22.54. Miss Fuller died in January 1975 at the age of 100. During her 35 years as a beneficiary, she received over $22,000 in benefits.

11/19/45In a special message to Congress, President Truman proposed a comprehensive, prepaid medical insurance plan for all people through the Social Security system.

08/01/56The Social Security Act was amended to provide monthly benefits to permanently and totally disabled workers age 50 through 64 and for adult children of deceased or retired workers, if deceased before age 18.

06/30/61The Social Security Amendments of 1961 were signed by President John F. Kennedy, permitting all workers to elect reduced retirement at age 62.

07/30/65President Lyndon B. Johnson signed the Medicare bill into law.

12/30/69President Nixon signed the Federal Coal Mine Health and Safety Act. Monthly cash benefits were provided coal miners who became totally disabled because of black lung disease, and for their dependents and survivors.

07/01/72President Nixon signed into law PL92-336 which authorized a 20% cost of living adjustment (COLA), effective 09/92, and established the procedures for issuing automatic annual COLAs in 1975.
10/30/72President Nixon signed into law the creation of Supplemental Security Income (SSI) for low income persons, not funded by Social Security deductions, but through general tax revenues from the federal government.
06/06/86President Reagan signed the Federal Employees Retirement System (FERS) Act which established Social Security coverage for federal employees hired after December 31, 1983.

05/17/94SSAs Internet Cite was launched on the World-Wide Web (SSA Online @

03/31/95SSA becomes an independent agency.

08/22/96President Clinton signs Welfare Reform Bill. This bills requires most recipients to work within two years of receiving assistance, limit most assistance to five years total, and lets states establish family caps to deny additional benefits for children born while the mothers are already on public assistance.

10/01/99SSA begins annual mailing of Social Security statement to all workers age 25 and over.

12/17/99President Clinton signed the Ticket to Work and Work Incentives Improvement Act of 1999, which would provide SSDI and SSI disability beneficiaries with a ticket they may use to obtain vocational rehabilitation (VR) services, employment services, and other support services from an employment network of their choice.

04/07/00President Clinton signed into law a bill eliminating the Retirement Earnings Test (RET) for those beneficiaries at or above normal retirement age. Under this legislation, the retirement earnings test no longer applies to people above the normal retirement age (NRA). The NRA is age 65 for those born before 1938 and it will gradually increase to age 67. This allowed over 900,000 people who were collecting benefits but also working to not have their benefits reduced because of work.
Present Privatization of our Social Security System has been mentioned. Three proposals to privatize the Social Security system are: 1) Calls for the system to invest some of its money in the financial markets instead of relatively listless government bonds. 2) Have workers place the bulk of their payroll taxes in individual retirement accounts (IRAs) that they could invest as they choose. 3) Calls for the individual accounts to supplement a system that would be similar to the current one.
2.Types of Social Security Benefits:
The four basic categories of Social Security are:
A. Retirement Benefits: Retirees who are 62 or older and who are fully insured are eligible to receive Social Security retirement checks. To be fully insured means to have enough working experience as measured by work credits under Social Security, normally a minimum of 6 credits is always required and no more than 40 credits in order to collect checks. Other persons in your family may also be eligible for retirement benefits when you retire if:
1.They are unmarried children under the age of 18 (19 if still full-time high school students).

2.They are unmarried children 18 and older and severely disabled before age 22.

3.The person is your spouse and 62 years of age or older.
4.The person is your spouse and under 62 years of age but caring for a child who is under 16 years of age.

5.Your spouse is disabled (whatever his/her age) and is eligible for disability benefits.

B.Disability Benefits: Social Security offers disability payments to those who have a physical or mental impairment, which prevents you from doing any substantial gainful work and the disability must be expected to last, or has lasted, at least 12 months or is expected to result in death. To prove this, when you file your disability claim you should bring with you letters from your doctors or hospitals or clinics where you have been treated, describing the medical condition that prevents you from doing any substantial gainful work. The letters should also state that your disability is expected to last for 12 months or is expected to result in death.
Some of the conditions that are generally regarded as being disabling are:
1. Heart, lung or blood disease, which result in breathlessness or fatigue, despite treatment.
2.Severe arthritis that makes it difficult for you to walk or use your hands.
3.Mental illness that restricts activities and personal relationships.
4.Brain damage that results in memory loss and problems with judgment or orientation.
5.Progressive or malignant cancer that cannot be controlled.
6.Digestive system diseases that result in malnutrition or anemia
7.Diseases that have resulted in loss of limbs or loss of the use of limbs.
8.Inability to speak
9.Blindness, where you have 20/200 or worse vision in the better eye with the use of corrective lenses. This list is not complete and individual circumstances as well as work experiences are taken into consideration.

C.Dependents Benefits: If you are the spouse of a retired or disabled worker who qualifies for retirement or disability benefits, you and your minor or disabled children may be entitled to benefits based on the workers earning record. To be entitled to benefits, you only need to prove that you fit one of the following categories:
1.A spouse 62 or older
2.A spouse under age 62 if he/she is caring for the workers child who is under the age 16 or who is disabled before the age of 22.

3.A disabled spouse under age 62. Benefits depends on the earnings records of you and your spouse.
4.A divorce spouse age 62 or older if your marriage to the worker lasted 10 years or more, you have been divorced two years, even if your ex-spouse has not yet claimed retirement benefits as of January 1, 1985.

5.Unmarried children under age 18.

6.Unmarried children of any age if they were severely disabled before they reached age 22 as long as they remain disable.

7.In few cases, grandchildren of the worker qualify for benefits if they live with and are under the actual care and custody of the worker. Proof of actual dependent status is required.
D. Survivors Benefits: Social Security has a life-insurance aspect in the form of survivor benefits. If you die, your dependents and spouse are eligible to receive survivors benefits if you are currently or fully insured under Social Security. If the worker had enough work credits, the following family members would be eligible for survivors benefits: 1) surviving spouse (widow or widower) age 60 or over. If you were divorced, your marriage must have lasted for at least 10 years. 2) surviving spouse under age 60 if caring for the workers child under age 16. This benefit is often called the (mothers benefit or fathers benefit). 3) surviving spouse age 50 or older who becomes disabled within 7 years of the workers death or within 7 years after (mothers benefits or fathers benefit). A disabled surviving spouse must be unable to perform any gainful activity (rather than no substantial gainful activity) before benefits will be paid. 4) unmarried children under 18 (benefits may continue to age 19 if the child remains a full-time high school student). 5) unmarried children of any age who were severely disabled before age 22 and are still disabled. 6) Parents of the workers who are at least age 62 and who were actually dependent on the worker for at least one-half of their financial support.
3. How Social Security is Financed: Social Security is financed by contributions made to the fund by employees, employers, and those who are self-employed. You and your employer pay equal amounts into Social Security; in essence, your employer matches your contribution. The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion is 6.20% on earnings up to the applicable maximum taxable amount for the year 2001 which is $80,400 (maximum tax withheld is $4,984.80). The Medicare portion is 1.45% on all earnings.
The monies you pay into the system along with your employers matching contributions are mailed to the Internal Revenue Service (IRS) on a quarterly basis (or sooner). As long as you have the earnings that are covered under the law, you will continue paying taxes even though you may be drawing retirement benefits from Social Security, until you reach the age of 65, and then you are covered by the Retirement Earnings Test signed into law by President Clinton on April 7, 2000.
4.How You Earn Social Security Work Credits: To receive any kind of Social Security benefits, you must have accumulated enough work credits from covered employment to reach insured status for the benefits you are claiming. Work credits are measured in quarters (January through March is the first quarter of each year, April through June is the second quarter, etc.) in which you earn more than the required minimum of money in covered employment. The number of work credits you need to be fully insured and eligible for benefits, depends on the benefits you are applying for and your age when you apply. You can only earn four quarters of work credits in any calendar year towards Social Security eligibility no matter how much money you make, the amount of the benefits you ultimately receive will be higher or lower depending on your total earnings over the years.
In summary, I have touched on the Brief History of Social Security, Types of Social Security Benefits, How Social Security is Financed, and How you earn Social Security Work Credits. The clock is ticking for the Social Security System with a gigantic baby boom generation approaching retirement age, Social Security faces a funding crisis. By about 2012 more money will be going out to Social Security recipients than will be coming in from workers payroll taxes. The systems trust fund can cover the difference for a while, but by about 2032 the trust fund will be empty and the program will no longer be able to meet all of its obligations.
Historically, politicians have had a simple, consistent position on Social Security, do nothing. However, a spirited bipartisan debate is raging in Capital Hill and across the nation, over a handful of possible changes, all of which were considered unthinkable a few years ago: 1) Cutting benefits across the board (or just for the wealthy). 2) Raising the payroll tax across the board (or just for the wealthy). 3) Raising the age at which retirees become eligible. 4) Investing the trust fund more aggressively. 5) Letting workers contribute to personal security accounts that the government would manage (or that workers would manage themselves).