Social Security Program

According to Milligan and Wise (2011), the Social Security program offers a structure that safeguards American citizens against the loss of earnings because of retirement or death. This is a welfare plan comprised of cash aids, medicinal necessities, food aid, housing grants, learning and day-care support, and other essential services. In the early 1930s, the United States government had to devise ways of funding the freshly-constituted Social Security Program. In this case, the Federal Insurance Contributions Act (FICA) presented a suitable mechanism for financing the program.

Prior to the Great Depression, the nation had no saving mechanism in preparation for retirement, therefore, posing a challenge for the American citizens. Additionally, no government-mandated insurance structure was put in place as well as income for people with disabilities, therefore, leaving the American citizens to cater for themselves. Through the FICA, the government viewed this a great way of deducting a certain amount from citizen’s pay to cater to social security and Medicare.


On August 13th 1935, Social Security Act into law by President Roosevelt, which guaranteed individuals’ income for retired members of staff above the age of 65.  Citizens that were initially able to benefit from the program were neither the minority groups nor women. According to Coile and Levine (2011), because the 1930s was believed to be challenging in regard to specific issues, minority groups and women were not assured of accessing the Social Security benefits. Moreover, if workers worked on a full-time basis or part-time, they were also excluded. This meant that of the working population in America was not guaranteed of the Social Security subsidies. During the initial period of the plan, every American citizen received their retirement reimbursements in Lump-sum disbursements. The payments were intended to assist individuals by returning a portion of the money contributed to the system.

Most of the individuals that obtained a lump sum disbursement were those that would not be contributing long enough as a result of various reasons—for instance, age or occupation. The first-ever disbursed payment entailed $0.17. The committee on Economic security was then designed into four sections by former President Roosevelt. The sections held together with the complete Social Security Administration and comprised of the Technical Board, Council of Advisory, Executive leadership council, and an Executive Director. The principal purpose of the CES was to present the United States administration with a comprehensive framework for social insurance. The administration sought to incorporate old-age reimbursements, survivors’ reimbursements, personnel compensations, disability insurance, and redundancy rewards. For many years, this turned out to be a significant challenge. However, disability cover, survivors’ paybacks, and health cover was stroked out from the Social Security Act until the 1950s, when they were converted into long-lasting aspects.

Current Structure

Currently, the social security program comprises of three vital programs. They include retirement insurance, survivor benefits, and Disability insurance. The retirement benefits offer a lifetime source of revenue for individuals depending on the income upon attaining a retirement age of 65. This is based on the worker’s region of birth, and also individuals have an opportunity of obtaining lower income on a monthly basis from the age of 62. The next program entails the survivor benefits. This offers a monthly revenue for a lifetime to the surviving spouse or dependent individual below 18. The same aspects are utilized in the calculation of the  According to DeWitt (2010), if an individual receives the pension before attaining the age of 62, the benefits reduce to approximately 32.5% of the full amount obtained upon retirement. The same aspects are used to calculate the retirement insurance benefits.  The next program involves disability insurance. This form of insurance remits monthly revenue to disabled personnel and, in other instances, paid to the partners and dependents under the legal age. Moreover, the payments are remitted depending on income history.

The social security program is financed through the Federal Insurance Contributions Act. This comprises of 6.2% on the employees’ wages and the employers, to a maximum of $128,400. In addition, the trust fund obtains a significant interest amount in its reserves at a rate of about 2.9% every year. After the enactment of the 1983 legislation to assist in the stabilization of the program, the financial and social security benefits are subjected to taxation. Therefore, the three aspects represent the financing of the social security program.

Calculation of Benefits

The social security administration uses a price increase adjustment to average a worker’s highest wages for 35 years. The average payments are utilized in the calculation of retirement reimbursements. According to Coile and Milligan (2016), a worker is entitled to full reimbursements if the appropriate retirement age is attained. If an individual chooses early retirement, the reimbursements are slashed to 75 percent. A worker earns a percentage based on the date of birth, which is added to the benefits at the period of retirement. This is if a person seeks to continue working past the age of retirement.  In order to establish the PIA, the average indexed monthly earnings are applied to a precise formula. The formula entails 90% of the first $895 in AIME, 32% of the total of AIME greater than $895, equal to $5,397, and 15% of the total of AIME greater than $5,397.


The program is developed for individuals that have attained the age of 65 or above, individuals below the age of 65 with various disabilities and individuals with Kidney failure. The Medicare program is funded by deductions from an individual’s income, similar to the social security program. Moreover, premiums are deducted from social security checks.

Supplementary Security Income

The supplementary program, administered by the social security plan, offers extra reimbursements on a monthly basis, remitted to qualified citizens with restricted revenue and resources. The necessary SSI sum of $733 for a person and $1000 for a duo is similar nationwide. Nonetheless, various states offer supplementary funding for these benefits.


President Roosevelt believed that the failure or success of any administration in the ultimate analysis ought to be measured by the citizens’ well-being. Nothing is considered to be more fundamental to a state than a nation’s public health. The aspect of financial aid to citizens without the ability to work is social security. This allows American citizens to retire, devoid of worries to other family members. Extra aids, such as Medicare and SSI can offer further support for needy persons. Meanwhile, dependence on Social Security as a key source of revenue cannot cater for every expense. The social security program continues to be the effective, productive, and popular plans as it has continuously assisted American citizens since its inception.




DeWitt, L. (2010). The development of social security in America. Soc. Sec. Bull.70, 1.

Coile, C. C., & Levine, P. B. (2011). Recessions, retirement, and social security. American Economic Review101(3), 23-28.

Coile, C. C., & Milligan, K. (2016). Social security programs and retirement around the world: disability insurance programs and retirement. University of Chicago Press.

Milligan, K., & Wise, D. A. (2011). Social Security Programs and Retirement Around the World: Historical Trends in Mortality and Health, Employment, Disability Insurance Participation and Reforms-Introduction and Summary. NBER Working Paper, (16719).

Manchester, J. (2013). The Social Security Disability Insurance Program. Testimony before the House Committee on Ways and Means, Subcommittee on Social Security, March14.

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