Social Security and How It Works - Essay Example

Name: Subject: Professor: Date: Social Security Summary Originally the term social security was used to describe any curriculum with the intention of helping individuals with inadequate monetary resources. Social Security is one of the most accepted federal programs, yet most people do not know much about it and how it works. Social Security has multifaceted benefit formulas and policies that make it complex for many people to understand how it functions. His paper describes the basics of social security and its working methodology (Demidov 24). It addresses what social security is, its associate programs and what social security funds are. The Social Security Act (SSA) was formally enacted in 1935 under President Franklin Roosevelt and has undergone various changes over the years with respect to the changing economy (Hagemejer and Roddy 2). Also, the paper addresses the advantages, weaknesses, threats, and opportunities of the working methodology of social Security. The social security working system consists of mainly three programs which are implemented and overlooked by the administrative unit of social security program. The three programs include the retirement, the survivors and the disability programs. History of Social Security The initial widespread Social Security in the United States was the civil war expert pensions. Firstly compensations were offered to Union veterans who got disabled in clash or to the families of the bereaved union soldiers. Later on, the program was extended for inclusion of any Union veterans who got disabled. This inclusion involved the veterans who got disabled in the war or outside the war (Demidov 26).The program was launched in 1894 and huge amounts federal government money was spent on military pensions. The Great Depression in the year 1930 revealed the importance of a wide-ranging system to provide adequate cash to the underprivileged and the aged so that they could support their needs independently. Majority of Americans were either jobless or their earnings were too little to cater for their families’ needs ("Index to Public Finance” 432). In 1932, Franklin Roosevelt came up with the ideology of social insurance. Consequently, Roosevelt idea developed into the social security of today. In the year 1934, Roosevelt developed the Committee on Economic Security (CES). The committee had been in use in many European countries. The new ideology was that workers were allowed to save a particular percentage of their earnings to their cumulative account. The workers would then withdraw the money when they are retired to assist them in meeting their monthly needs. The Social Security Act (SSA) was formally enacted in 1935. In the past decades the United States government has made adjustments to the SSA retirement-assistance system with respect to the population changes sand economic status. Some of the changes involve the receiving of payments by the families of workers and cost-of-living regulations (Tsiakis 1269).These changes enabled the increment of Social Security benefits alongside inflation without the requirement of a major operation of Congress. Also, disability stipulations were added to the program. An analysis of how social security works Social security programs Social security emerges as the most popular government-established program in the United States of America and other countries. However, the majority of the public knows little or nothing about the program and how it works (Tsiakis 1269).This analysis section focuses on contextual description of the programs underlying the social security framework. These programs make up the strengths of the social security program. The social security framework consists of mainly three programs. The programs are implemented and overlooked by the administrative unit of social security program. The agency divided the programs to cover the needs of the entire American society. The three programs include the retirement, the survivors and the disability programs (Hagemejer and Roddy 4). First, the retirement program offers a monthly-based lifetime salary (income) after retirement for the qualified individuals of the public. The common age of retirement ranges from 65 to 67 years. The amount of the monthly-based income depends on the individuals monthly earnings before retirement. Alternatively, an individual can access a reduced monthly income at the age of 62 years (Mckinnon 461). The program is important because it provides retirement cover to physically and mentally healthy individual of the American society. Second, the survivors program ensures that a lifetime monthly-based income is given to the surviving partners of deceased workers when they retire from their jobs. Just like the retirement program, the survivors program’s monthly income depends on both partners’ monthly earning s while the deceased was still alive and employed (Sohrab 268). In addition to the monthly income paid to the surviving partner, the survivors program caters for the needs of the children under the age of 18 years (Hagemejer and Roddy 10). However, the children catering terminates when the last born of the family either completes high school education or attains the age of 18 years, unless either of the children have a disability. The program is advantageous as it ensures that the children of the deceased are in a better position to support their lives. Finally, the disability program provides a monthly-based lifetime income to disabled workers. The program sometimes extends to the family members of the disabled worker. The rate of the monthly income depends on the earning history of the disabled worker. Particularly, before the worker became physically or mentally disabled (Sohrab 270) The three programs prove to be the main strengths and advantages of the social security framework. In this regard, they encourage many Americans and non-Americans to become members. Alternatively, the programs can be viewed as new opportunities for the agency. They tend to cater for the needs of all American people create; hence, they lure and encourage many workers to register with the agency. Therefore, they open a gateway for the inclusion of many people which prompts the growth and expansion of the agency (Martin and Jeffre 1305). Qualification for social security Any working individual does not directly qualify for the retirement benefits of social security programs (Hirst 312). There is a procedure followed in registering new individuals to the program. After registration, the members have to pay the standard minimum level of social security retirement taxes for at least three quarters of their employed period. The qualification stage presents the main threat on the framework of the social security. Although, the members do not need to pay the quarters in a consecutive manner, it is mandatory that they pay in full amount the whole quarters. After paying taxes for the three quarters of their working period, the workers are fully entitled to social security benefits. In a situation where the workers have not completed the minimum required standard and they die or become disabled, the former are entitled to survivors’ social security benefits while later are entitled to the disability’s social security benefits. This aspect tends to lessen the threat on the social security framework (Hirst 310). Additionally, the aspect of disability in social security program means that the worker is not physically or mentally fit to carry out any work-associated responsibilities. The declaration of disability is confirmed by a government medical care agency report in the particular state where the individual works and lives. The social security benefits include both Americans and non-Americans working in the United States (Sohrab 264). The main requirement needed by social security agency for any individual’s qualification for the program is the social security number. The social security number presents another threat; whereby, stealing social security numbers has become the most common social crime in the United States. The stealing of social security numbers is mostly done by illegal immigrants. Hence, a genuine American citizen might lose all the social security benefits in such events ("Index to Public Finance” 434). State of confusion It is important to note that there are other social security supplemental programs that most people confuse with the social security benefits. The state of confusion forms the main weaknesses of the social security programs (Martin and Jeffre 1305). These programs are independed from the social security program and they are taxed separately. They include Medicare, FICA and Supplemental Security Income. First, the Medicare program aids in settling the hospital bills of aged Americans. It was established by the federal system of the United States (Lubove 333). The public confuses Medicare and social security in the context of taxes paid to the government, whereby, most times taxes for both programs are paid in a lump sum. They only differ in terms of the administrative agency. The social security program is administered by the social security agency while the Medicare is administered by the federal system. Therefore, the government needs to separate the two for the public to understand the difference between Medicare and social security benefits. Second, FICA (Federal Insurance Contribution Act) is a general term that refers to the lump sum tax which combines social security taxes and Medicare taxes. Moreover, FICA tends to highlight only half of the amount paid by the employer on the behalf of the worker. FICA forms the major weakness of the program (Tsiakis 1268). It does not reflect the exact amount deducted from the monthly pay cheque; which discourages the workers in trusting the financial system of the program. Finally, the Supplemental Security Income (SSI) caters for the blind, disabled, and aged Americans with little or no source of income. It enables them to meet their daily needs such as food, clothing and shelter among other needs. It is paid together with other general government taxes (Grover 435).However, the program is administered by the social security agency. For any individual to qualify for the SSI, they should be older than 65 years of age, disabled or blind. At a glance, the SSI seems to be a beneficial venture, but it creates a negative image in the public eye. People view this program as a way of extorting their taxation money by the government (Mckinnon 457). Importance of Social Security The actual Social Security dominates over 90 percent of the household monetary assets. In the fifth and the seventh deciles, social security is six times and two times the financial assets respectively; it shows that Social security funds offer more income compared to financial assets (Lubove 330). Despite being a social safety net, Social Security offers a perfect deal of the finances that offer support to the rapidly growing population. Majority of people do not have pensions; hence, pensions do not mean much to the households. Majority of Americans are not into the retirement savings program. Consequently, majority rely on Social Security for their comparatively small retirement benefit according to Rose Eisenberg, a delegate at the Economic Policy Institute (Mckinnon 460). Approximately 20 percent of workers have approximately $308,000 put away for retirement benefit. However, the wealthy Americans receive over 75 percent of tax subsides, which aims at boosting the Americans’ retirement assets. It means that wealthy Americans are probably the exception groups that do not rely greatly on Social Security during the dusk years. Most people with disabilities receive benefits from Supplemental Security Income (SSI) a curriculum headed by Social security (Lubove 325). SSI is a program which benefits the aged, physically and mentally handicapped individuals, and the jobless. Roosevelt knew that the greatest enduring legacy for Social Security is adaptation. Social security has endured, flourished, and goes on to provide a foundation of financial security. It has accomplished this through huge macroeconomic shifts and transformations and doubts of personal and family lives. Such flexibility and incessant re-examination and upgrading is the most important part of adapting with respect to life changes. Social security is not a permanent unchanging thing; it is unbelievably adaptive and receptive system in which various economic and family securities have been formed over the decades (Grover 433). Conclusion This paper briefly described Social security and how it works. The Social Security Act (SSA) was formally enacted in 1935. In the past decades the United States government has made adjustments to the SSA retirement-assistance system with respect to the population changes sand economic status. The most enduring legacy is the adaptability nature of the Social Security program. Social security is a very important program within the discipline of public finance. 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