How Does Social Security Actually Work?
Oct 13, 2026
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Video Summary
AI GeneratedSocial Security is a federal insurance program established in 1935 to provide financial support for retirees, disabled individuals, and survivors. Funded by payroll taxes from workers and employers, it serves as a partial income replacement based on a worker's highest-earning years to help maintain financial stability after leaving the workforce.
Social Security is a federal social insurance program
that offers financial protection
for when you retire, become disabled, or lose a loved one.
Signed into law in 1935,
Social Security was designed to replace a portion of the income
someone lost after being unable to work anymore.
The program is described as a pay-as-you-go system,
where workers and employers contribute
to the fund through payroll taxes.
Your Social Security check is calculated
by the Social Security Administration
and is based on your highest earning years.
The SSA takes your 35 highest earning years,
adjusts them for inflation,
and inserts them into a formula
to determine your primary insurance amount.
You can start collecting Social Security at the age of 62,
but in order to receive a higher monthly benefit,
you have to wait until the full retirement age of 67.
Social Security replaces around 40% of pre-retirement income,
so most people will need savings from their 401k or IRA
to maintain their lifestyle.