Social security is the third leg of the three-legged retirement stool. It is intended to be a supplement to other forms of retirement income (including investment income and retirement plan funds). It is not to be viewed as a replacement or substitute for earnings. As a general guideline, social security benefits can supplement about one-third to one-half of regular earnings.
Most people think of social security as simply a pension plan for their retirement. But what many people do not realize is that social security is also a system that replaces income lost by a disabled worker or the family of a deceased worker, regardless of age.
What Social Security Pays
Social security pays four types of benefits:
- Retirement insurance. Social security pays a monthly benefit upon retirement, from age 62 on, for life. Spouses and children may be eligible for benefits, too.
- Survivor's insurance. This is like life insurance. In the event of the worker's death, the spouse and children may be entitled to benefits. In some cases, parents may also be eligible for benefits.
- Disability insurance. The disability benefit of social security assures that a monthly income will be available in the event of illness or injury. Spouses and children may also be entitled to benefits.
- Medicare. The Medicare program— often confused with the Medicaid program, which covers the indigent— provides hospital and medical insurance. The medical insurance requires a small additional monthly premium, but there is no premium for Medicare hospital insurance.
Early and Late Retirement
The age at which an individual retires will have a bearing on the amount of social security benefits paid...