Social Security U.S.A.-- The Program & Its Administration


". . . we share a care and a concern for the elderly, for the sick and for the handicapped. We will not turn our back on those who through no fault of their own can no longer sustain themselves. . . . To us the old, the sick, the hungry, the helpless have represented not failures to be forsaken, but human beings to be helped. This Nation will never again fall into indifference toward the distressed and the despairing."

From an address delivered in Los Angeles, Calif., June 20, 1964.

graphic of family  


THE basic idea of the social security system in the U.S.A. is a simple one.

During working years employees, their employers, and self-employed people pay social security taxes which go into special funds; and

When earnings have stopped because the worker has retired, or died, or is severely disabled, benefit payments are made from the funds to replace part of the earnings the family has lost.

- Nine out of ten working people are now building protection for themselves and their families under the social security law.

- More than four-fifths of all the people past 65 are protected by social security and more than 90 percent of those now reaching 65 are protected.

- Nine out of ten mothers and children can look to the program for a regular income if the head of the family dies.

- About 53 million people now meet the work requirements for monthly disability benefits. If they are disabled, monthly benefits can be paid to them and their families.

- Almost twenty million men, women, and children are now drawing benefits under this program-benefits totaling more than $1.25 billion a month.

Retirement benefits. Benefits are payable to retired workers at age 65, or reduced-rate benefits may be paid as early as age 62. Benefits may also be paid to the following family members: a wife or a dependent husband age 62 or over; children under age 18, and older sons and daughters who have been disabled since before age 18; and a wife of any age caring for a child entitled to benefits.

Survivors benefits. Upon the death of an insured worker, monthly benefits are payable to a surviving widow or dependent widower age 62 or over, children under age 18 or disabled before 18, a mother who has such a child in her care, and dependent parents age 62 and over. A lump-sum death payment is also made.

Disability benefits. Monthly benefits are payable to workers who are totally and permanently disabled and to the same dependents as for retirement benefits. The law encourages rehabilitation of disabled workers under the Federal-State program of vocational rehabilitation.

photo of Ida Fuller for 1964 booklet

Miss Ida Fuller of Ludlow, Vermont, received the very first monthly social security benefit check in January 1940. The retired legal secretary, who is now 90 years of age, has received a check every month since. Miss Fuller's family had settled in Vermont in 1635. She was born on a farm a few miles from her present home and was the oldest of four children. She attended the Black River Academy and was a freshman there when Calvin Coolidge, later to become the President of the United States, was a senior. At 17, she passed an examination for a teacher's certificate and spent the next 12 years as a teacher. At that point, she decided to change careers and enrolled at a Boston business college to learn shorthand, typing, and bookkeeping. On her return home, she was employed by Stickney, Sargent, and Skeele, a Ludlow law firm, where she worked until her retirement on November 1, 1939.

Miss Fuller lives alone in her own home and does her own housework. She supplements her social security benefits with the rental of an apartment and income from some bank stock she owns.

Amount of Work Required

The worker earns his social security protection by working in covered employment or self-employment; he pays social security taxes out of his earnings. To qualify for retirement benefits, including benefits for his wife and any dependent children, he must have credit for a certain amount of work covered by social security. The amount of work he needs depends upon when he was born--the older he is, the less time he needs to have worked under the program. Those who were born earlier need to have worked under social security for a period equal to one-fourth of the time between 1950 (or age 21, if later) and the year in which they reach 65 (62 in the case of a woman). A man born in 1926 or later (or a woman born in 1929 or later) will need a total of 10 years of work under social security to qualify for retirement benefits. Covered work at any time after 1936 can be credited toward this requirement. The minimum is a year and a half of work under social security for men born in 1892 or earlier (or women born in 1895 or earlier).

If a worker dies, benefits can be paid to the widow (or widower), dependent children, and aged dependent parents if he (or she) has social security credit (earned at any time after 1936) for a period equal to at least one-fourth the time between 1950 (or age 21, if later) and the year of death.

To provide protection for the families of younger workers who may die before they have met this requirement, the law makes monthly survivors benefits payable to dependent children and to their widowed mothers if the worker had social security credit for at least a year and a half out of the three years just before he died.

If a worker becomes totally disabled before age 65, he and his wife and children may be paid monthly benefits if he has worked under social security for at least 5 out of the 10 years before his disability began and also for one-fourth of the time between 1950 (or age 21, if later) and the year in which he becomes disabled.

Kinds of Work Covered

Almost every kind of employment or self-employment is covered by social security. Theprincipal groups not covered are doctors of medicine in practice for themselves; Federal employees in jobs covered by a special Federal retirement system; and most policemen and firemen with their own retirement systems. Also not covered is work done by a child under 21 for his parent, by a husband for his wife, or by a wife for her husband. Work done by a parent for a son or daughter is covered only if it is in the course of a trade or business.

Amount of Benefits

The amount of a worker's monthly benefit is based on his average earnings. The more regularly he works in employment or self-employment covered by the program and the higher his earnings, the higher his benefit will be. The amount of his retirement benefit will also depend on whether he starts to collect benefits at age 65, or because of ill-health, unemployment, or personal reasons, decides to take them earlier (he can begin to get benefits as early as age 62). To take account of the longer period over which payments will be made, the monthly retirement benefit is reduced if the worker chooses to take his benefits before he is 65.

The amount of the benefits payable to a worker's dependents or survivors is based on the amount of the worker's benefit.

Social Security is Income Insurance

A social security beneficiary who works and earns $1200 or less in a year can collect his benefits for all 12 months of the year. But if he works and earns more than $1200 in a year while he is still under 72, some or all of his benefits will be withheld.

For each $2 he earns above $1,200 and up to $1,700, $1 of his benefits is withheld; and for each $1 he earns over $1,700, $1 in benefits is withheld.

The law, however, takes into account the situation of many people who retire in the middle of the year and of those who can do just an occasional job at reasonably good wages. A beneficiary, regardless of how much he makes in a year, gets benefits for any month in which he earns wages of $100 or less, and is not active in a business of his own. Thus, a person who retires during the year, after he has already earned well over $1,200, can still get benefits for the months after his retirement--if, in those months, he does not earn wages of over $100 and is not active in a business of his own.

The reason a beneficiary under 72 cannot get benefits regardless of the amount of his earnings is that social security is insurance against the loss of earnings. Generally, if a beneficiary has substantial earnings, the benefits are not payable because that loss of earnings against which the worker and his family are insured has not occurred.

Beginning with the month he reaches age 72, a beneficiary gets all his monthly benefits no matter how much he earns. This provision recognizes that some people go on working and paying social security taxes to the end of their lives and might otherwise never get any monthly benefits.

How the Program is Financed

The social security taxes paid by employees and their employers, and by self-employed people, go into two trust funds, which are kept separate from all other funds in the U.S. Treasury. The Federal Old-Age and Survivors Insurance Trust Fund, the older and larger of the two social security trust funds, was set up in 1939 to finance the payment of old-age and survivors insurance benefits. The newer of the two funds is the Federal Disability Insurance Trust Fund.

This fund was set up in 1956 to finance the benefits payable to workers who become totally disabled for any substantial work before they reach 65. Under amendments to the law, benefits are also payable from this fund to the dependents of disabled persons. A fixed part of the social security tax is earmarked to pay these disability benefits.

twin boys

In December 1962, Mrs. Mary Lee Payne of Springfield, Tennessee, burned to death trying to save her five children from their burning home. She was able to save only her twin sons, Jimmie and Timmie. They now live with Mrs. Payne's parents, Mary and Roosevelt Lucas. Jimmie and Timmie are receiving monthly social security benefits based on their mother's earnings as a household employee. Their grandfather said, "I want to care for the twins the best I can and send them to school. The social security payments will be a great help."

photo of big family

When a 1961 airplane crash left Mrs. Beth Scheib and her I I children without a husband and father, the future looked dark. Expecting her twelfth child, Mrs. Scheib felt sure that the family would lose their farm and might have to be broken up. But with a steady income of $212 in social security survivors benefits and a monthly check based on her husband's military service, the family has been able to stay together. Mrs. Scheib, I 3-year-old Steve, and Grandfather Lawrence H. Scheib, run the farm machinery. Jim, 10, Clifford, 12, and Jerry, 11, help in the fields. Teenagers Linda and Cathy help take care of the house and the younger children with the help of Grandmother Agnes Scheib.

The social security law, as originally enacted in 1935, provided only retirement benefits for the worker himself. But in 1939, before any monthly payments had yet been made, Congress changed the law to provide benefits also for the widows, children, and aged dependent parents of deceased workers and also for the dependents of retired workers.

By law, the assets in these two trust funds can be used only for the payment of benefits and administrative expenses. The money in the funds not needed currently for the payment of benefits and operating expenses is invested in interest-bearing U.S. Government securities. The interest earned on these investments is added to the trust funds.

The trust funds serve two important purposes--

1. The interest income on the invested assets of the funds helps to keep the social security taxes lower than they would have to be if the money in the trust funds were not invested.

2. They can be drawn on in temporary situations when current income is less than current outgo.

To cover the cost of paying benefits to an increasing number of people, the law provides for

gradual increases in the social security tax rates, with the last scheduled increase going into effectin January 1968. This schedule of tax rates is shown below. Of the tax rate shown, a fixed percentage of taxable earnings--one-quarter of one percent each for employers and employees, and three-eights of one percent for self-employed persons--is credited to the Federal Disability Insurance Trust Fund.

Only the first $4800 of a worker's annual earnings is taxable.

Calendar Year Employee Percent Employer Percent Self-Employed Percent

3 5/8

3 5/8



4 1/8

4 1/8


1968 and after

4 5/8

4 5/8


The social security taxes, along with the interest earned on invested assets of the funds, are expected on the basis of actuarial estimates to be enough now and in the future to pay all benefits provided for in the present law.

photo of medium family

William Bach, 37, of St. Cloud, Minnesota, had worked for a local department store and as a food route salesman until 1959, when he was stricken with polymyositis, resulting in muscular dystrophy. He applied to have his social security record frozen to protect his future benefit rights; at that time the payment of cash disability benefits was limited to disabled workers aged 50 or over. When the law was changed in September 1960, to remove the age limitation, Mr. Bach, his wife and his three children became eligible for benefits of $254 a month. He has since taken a correspondence course in orchestra arrangements and hopes to get some work in this field in the future. When his health permits, he plays the clarinet and baritone saxophone in the municipal band.

Protection against the risk of income loss resulting from disability was provided in 1954 when provision was made to preserve the benefit rights of disabled workers. In 1956, cash benefits were provided for disabled workers between the ages of 50 and 65 and for the disabled children of retired or deceased workers, if their disabilities began before their 18th birthdays. Amendments in 1958 added benefits for the dependents of disabled workers, and in 1960, disability benefits were made available at any age.