How the Social Security System Works

Social security benefits

The Social Security System is a program of the government that provides social insurance to qualified individuals based on their conditions as workers, dependents, unemployed, and senior citizens, sick or disabled.

Historically, the development of the Social Security System started in 1935 during the term of President Franklin Delano Roosevelt when the Great Depression took place and poverty was a high 50% among old people. Under the Social Security Act signed into law by Roosevelt, retirees were given financial benefits while lump-sum money was paid upon the death of a member to his or her beneficiaries.

How the Social Security System Works

Funds for the system are generated from payroll tax levied on the wages of each working individual. The payroll tax is based on the workers' income bracket. The higher the income of an individual, the higher the amount he has to pay. On the other hand the employer has a counterpart contribution to the system which is exactly the same as the amount contributed by the worker. Self-employed individuals can also contribute and be members to the Social Security System.

In a nutshell, the self-generated funds for the Social Security System are collected from the members is the same money that pays the various benefits received by other members. The scenario is this: Younger working members remit their payroll taxes to the system. These members who are physically able are expected to continue working and contributing their dues to the system for many more years. On the other hand, while these active members go on working and paying, there are older (retiring) as well as physically disabled members who will be getting benefits from the Social Security System. The benefits that these entitled members receive come from the funds contributed by the actively paying members. And so this will go on like a cycle, much like how a friend is helping another friend and vice versa.

Benefits from the Social Security System

Members are entitled to the following benefits: retirement benefits, disability benefits, survivor benefits, unemployment insurance and benefit, and pension benefits.

  • Retirement benefits - The sum of money that a retiring member receives depends on his or her contributions during the time of his membership. As pointed out earlier, the amount of contribution is relative to the income of the member. Obviously, the higher the salary that a member receives, the higher the retirement benefits he or she will be paid.
  • Disability benefits - After five consecutive months of paying to the system, a member can already apply for disability benefits. Security disability benefits are granted to members at any age that can prove to have sustained injuries or suffered health conditions that are long term and which can entitle them to disability claims.
  • Survivor benefits - A surviving spouse is given survivor's benefits when the member spouse dies. Depending on the case, there are also divorced spouses who are entitled to these benefits. Likewise, a surviving spouse with disabled children or minors in his or her care will receive benefits as well. However in this case the identity of the children is strictly examined to prevent fraud. Security death index among members is projected each year to ensure sufficiency of payments.
  • Unemployment benefits - When a worker is laid off and loses his or her job, he or she receives a monthly pension for six months from the Social Security System. This aid is aimed to help him or her during the time that he or she is not earning wages, is actively looking for another employment, or while undergoing school education, whichever is the case. 


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