Social Security Helps Support Those With No 401K Plan
Before the invention of the 401 retirement plan, there was Social Security. Social Security has been with us for sixty plus years – it’s hard to believe. The first Social Security check went out in the mail in 1940 even though President Roosevelt had signed the Social Security Act into law, five years earlier. Since that time, quite a few American seniors have been thankful to receive that monthly financial safety net as they enter their retirement years.
In the original incarnation of the bill, Social Security benefits were only to be paid to the primary worker. But, before the bill went live, additional benefits for the spouse and children were added.
Many people mistakenly believe that the Social Security system is like an investment annuity, where you lend money to the government and let them invest it with the expectation that you will live off the resulting income. In truth, however, the system is closer to a government welfare program. The collection of payroll taxes , which funds the Social Security program, is handled under the authorization of the Federal Insurance Contributions Act, better known as FICA. FICA is like the enforcement arm of the system. It ensures that every worker “contributes” his or her fair share to the government pool.
Whenever a new generation of workers comes along, they assume the obligation of caring for the previous generation’s retirees. The sum of money that you eventually receive from the government has only a slight relationship to the amount of money that was withheld from your check over the years. From the very beginning, the system has collected over 9 trillion dollars from contributors and paid them out to recipients.
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