Care 411

Social Security

Speak Up To Save Your Retirement!

Social Security, which is also referred to as Old-Age, Survivors, and Disability Insurance (OASDI) program in the U.S. is a social insurance program signed into law by President Franklin D Roosevelt as part of the New Deal plan in the year 1935. Social Security is the largest social insurance program in the U.S. This program’s benefits include retirement pension, disability income, Medicare and Medicaid and also death and survivorship benefits. This program has been hailed as the most effective anti-poverty initiative in the U.S.

Social Security program is funded through dedicated payroll taxes called Federal Insurance Contributions Act (FICA). Social Security comprises two separate entities- The Old-Age and Survivors Insurance (OASI) program and the Social Security Disability Insurance (SSDI) program.

OASI provides monthly benefits to retired workers, their dependent family, and survivors of the deceased worker. In order to be eligible for this benefit, a worker must cover at least 10 years of employment. Until the year 1984, Social Security program was exempt from the income tax. In the year 1983, Congress decided to make 50% of social security benefits to the higher income recipient. The taxes thus collected are saved to the OASDI Trust Funds and the Medicare Hospital Insurance (Part A) Trust Fund. SSDI program provides monthly cash benefits to disabled employees who meet the minimum requirements and are certified as ‘unable to engage in any gainful activity’ due to a physical or mental injury. One should wait for 5 months from the onset of the impairment, to avail the SSDI benefits. Once, you start receiving the SSDI benefits, after 24 months, you will also be eligible for Medicare program as well. Every year, these benefits are boosted to compensate for the consumer price inflation.

Workers can begin collecting their Social Security retirement benefits when they turn 62. This is an early retirement age. But the full retirement age is calculated according to your year of birth. If you were born before 1960, your retirement age is 66, and if it is in or after 1960, then your retirement age it is 67.


When Social Security was passed, initially there were some critical questions over its constitutionality as the Court had previously dealt with another pension program, the original Railroad Retirement Act, which was found to violate the due process clause of the Fifth Amendment.
In 2005, President George W Bush described the Social Security as a program that is headed for bankruptcy and proposed the partial privatization of the program. Those supporting the privatization argue that, a privatized system would bring in new funds for investment, which would in turn produce real growth for the economy. But critics argued that privatization further worsen the program’s solvency and would result in large borrowings. They also warned that even if the privatization may theoretically free the government from financial responsibility, the government will be politically responsible for preventing those individuals who are at risk of loss from going into bankruptcy as the financial responsibility is transferred from collective to the individual.
Increasing unemployment has significantly reduced the amount of payroll taxes that fund the social security. When social security was commissioned, there were at least 16 active workers paying in for a single retiree. But it is projected that, in the future, there will be only about 1 or 2 active workers paying the taxes per retiree. So, it was found that the current system will create uneven burdens in the future.

On December 2011, President Barack Obama proposed a plan called the Bowles-Simpson plan for making the Social Security system solvent. He proposed a combination of increase in the social security payroll tax, and reduction in benefits. Republics raised objection to the tax increase and the Democrats opposed the benefit cuts.

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