Money Basics

What is Social Security?

Social Security benefits are based on the earnings recorded under your nine-digit Social Security number. When you work, your employer withholds Social Security and Medicare taxes from your paycheck. Your employer matches that amount, sends the taxes to the Internal Revenue Service (IRS), and reports your earnings to Social Security. If you're self-employed, you pay your own Social Security taxes when you file your tax return, and the IRS reports your earnings to the Social Security Administration.

As you work and pay taxes, you earn credits that help make you eligible for future Social Security benefits. You can earn as many as four credits per year. To quality for benefits, most people need 40 credits, or 10 years of work.

Social Security benefits can provide financial support for you and your family when you retire or if you become disabled. Such benefits can also be provided to your family if you die.

When it comes to planning for retirement, remember that Social Security should be only part of your retirement plan. By the time you retire, there may not be enough money to pay out full benefits. Saving money aside from your Social Security benefits for your retirement, therefore, is important.

To help you plan for retirement, each year the Social Security Administration sends you a personal Social Security Statement. It contains an estimate of the monthly benefit amounts you and your family may qualify for now and in the future. To view a sample statement, visit www.ssa.gov.