My Lucky Break

It’s hard to believe that Social Security has been with us for over sixty years – before there was even such as thing as a 401 retirement plan. The first Social Security check went out in the mail in 1940 even though President Roosevelt had signed the Social Security Act into law, five years earlier. Since then, many American seniors have been thankful to receive that monthly financial safety net as they entered their retirement years.

In the original incarnation of the bill, Social Security benefits were only to be paid to the primary worker. But, before the bill went live, additional benefits for the spouse and children were added.

Many people mistakenly believe that the Social Security system is like an investment annuity, where you lend money to the government and let them invest it with the expectation that you will live off the resulting income. In truth, however, the system is closer to a government welfare program. The collection of payroll taxes , which funds the Social Security program, is handled under the authorization of the Federal Insurance Contributions Act, better known as FICA. FICA is like the enforcement arm of the system. It ensures that every worker “contributes” his or her fair share to the government pool.

Whenever a new generation of workers comes along, they assume the obligation of caring for the previous generation’s retirees. The sum of money that you eventually receive from the government has only a slight relationship to the amount of money that was withheld from your check over the years. From the very beginning, the system has collected over 9 trillion dollars from contributors and paid them out to recipients.

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This entry was posted on Monday, March 9th, 2009 at 8:07 am and is filed under Break. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.