Social Security

Editor's Note: Understand the Social Security basics.

Tracy MorleyOverview: Social Security covers approximately 96 percent of Americans and represents a significant retirement benefit to most retirees. Ninety percent of retirees over age 65 receive Social Security benefits. These benefits account for approximately 41 percent of those retirees' income. Railroad workers covered by the Railroad Retirement Act, federal employees hired before 1984 and some state and local government employees are not covered.

An individual becomes eligible for Social Security benefits by working long enough and earning enough to accrue 40 quarters of coverage. These quarters are totaled to determine eligibility. The quarters do not determine the benefit amount. Benefits provided under Social Security include: (i) retirement benefits; (ii) disability benefits; (iii) death benefits; and (iv) survivor benefits.

Social Security is funded by taxes paid by both the employee and the employer and is calculated as a percentage of salary up to an annual maximum.

Trends: Social Security is facing significant financial challenges and faces a somewhat tenuous future. With baby boomers reaching retirement age, the financial strain on Social Security is likely to increase.

Author: Tracy Morley, SPHR, Legal Editor

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HR guidance on federal Social Security benefits.