Social Security: a Brief History and Concepts

Everyday Finance

Social Security

by Nick Schafer

The modern program of Social Security was established on August 14, 1935, by Franklin D. Roosevelt when he signed the Social Security Act. The program was created as mandatory social insurance designed to pay retired workers over the age of 65 or older a continuing income after retirement. Social Security has evolved into becoming the primary source of income for many retires, as well as an integral part of retirement planning.

The Social Security program operates by taxing employers and employees at a rate of 6.2% each on income. If one is self-employed, he or she will pay both portions of the tax for a total of 12.4% (not including Medicare tax). The money collected is put into a trust fund that pays monthly benefits to eligible retirees. In order to be eligible for benefits, one must have contributed to the system for at least…

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