The Social Security Act, part of FDR’s New Deal, was passed on August 14, 1935 in the midst of the Great Depression. It was founded as an insurance program administered by the government that would act as a safety net for retirees. Every pay period, an employee pays 6.2% of their earnings for Social Security and 1.45% for Medicare taxes. Workers pay the 6.2%Social Security taxon annual earnings up to $137,700. Meanwhile, the employer pays the same rate per paycheck, adding up to a combined 12.4%Social Security tax and 2.9% Medicare tax. You can collect your full Social Security benefits at age 67, and they are not taxed if you are over 67. You can also delay receiving your benefits until age 70 and receive higher benefits at that time. However, it generally does not make economic sense to defer your benefits. Once you become 67 and start collecting your benefits, you can continue to work, and it will not affect your benefits. You can also begin collecting at 62 with reduced benefits and further benefit reductions if you earn a certain amount of work income. Social Security is an insurance program that you and your employer paid for; it is not welfare.
The maximum monthly Social Security benefit that an individual can receive per month in 2020 is $3,790 for someone who files at age 70. For someone at full retirement age, the maximum amount is $3,011, and for someone aged 62, the maximum amount is $2,265. The benefit is calculated on your average wages, your salary, and the number of years you worked. The formula assumes 35 years of working life. However, the average Social Security benefit in the U.S. for 2020 is $1,503.00. Even though it is increased every year according to the Consumer Price Index and not taxed if you are 67 or older, this is only $18,036.00 per year. As I said, Social Security is only a safety net. You will need your retirement plan and other savings to have a comfortable retirement.