Social Insurance Number Check Sum Program

Couples should know Social Security rules

As a public service to residents, the Financial Planning Association of San Diego is answering financial questions for readers of The San Diego Union-Tribune. Today’s question – on Social Security benefits for married couples – is answered by Justin Reckers, director of financial planning with Pacific Wealth Management in San Diego.

Q: How do Social Security benefits work for married couples? Does each person receive their own benefits at the appropriate time, or is there a different formula?

A: Great question. Many couples do not take complete advantage of their ability to draw Social Security benefits because they simply don’t know the rules and the planning opportunities available.

Let’s start with a few facts about Social Security.

Social Security in the United States refers directly to a lesser-known federal Old Age, Survivors and Disability Insurance program. The program was originally rolled out in the 1930s in an attempt to limit what were seen as dangers to the American way of life, such as increased life expectancy, poverty and fatherless children. So the Social Security Act, signed in 1935, created social insurance programs to provide benefits to retirees and the unemployed, as well as a lump sum benefit to the family at death.

The largest component of benefits is retirement income. Throughout a person’s working life, the Social Security Administration keeps track of income and taxpayers fund the program via payroll taxes, also known as FICA taxes. The amount of the monthly benefit to which the worker is entitled depends upon the earnings record and the age at which the retiree chooses to begin receiving benefits.

Full retirement age is 65 if you were born prior to 1937, 67 if you were born after 1960. If you were born between 1937 and 1960 your full retirement age will be between 65 and 67. If you begin taking benefits prior to full retirement age they will be permanently reduced by a percentage based on the number of months up to your full retirement age. If you delay receiving benefits until after the normal retirement age additional retirement credits will be added to your benefit.

Ponzi Unmasked | The Freeman | Ideas On Liberty

Texas governor and Republican presidential aspirant Rick Perry stirred up a fuss when he impolitely called Social Security “a Ponzi scheme.” Was he right?

Ponzi schemes , which appear to be investment programs, have two elements. First, no investment actually takes place. People are promised returns on their money, but those returns don’t come from profits on successful investments; rather they come from new contributors to the scheme. Ponzi tells Contributor 1 that if he turns over a sum of money, he will see a handsome return next week. One week later Ponzi makes good on his promise — not by investing C1’s money, but by making the same promise to Contributor  2. Once C2’s cash is in hand, Ponzi can pay C1, and so on. Obviously, this is unlikely to last forever.

Now it so happens that this is indeed how Social Security works, except unlike Ponzi, the government uses compulsion. People are forced to pay FICA taxes, assuming that when they reach 65 they will receive a monthly check. Where will that money come from? From revenue extracted from the current working generation. No one’s contributions are invested. Until recently Social Security ran a large surplus; it took in more than it paid out to retirees. Was the surplus invested? No, it went into the government’s general fund. But the so-called trust fund wasn’t left empty-handed. The Treasury deposited a special nonnegotiable bond – an IOU.

Now that the trust fund runs a deficit , it must redeem the bonds at the Treasury for cash. The Treasury has its own deficit, of course, so it has no spare cash and must borrow from the public. Hence, inter-agency debt transforms into public debt. ( This Freeman . That should have already been clear. You couldn’t run a Ponzi scheme if you told your contributors the truth: “Give me $1,000 today, and I will double your money – as soon as I find two more people willing to give me $1,000 on the same condition.” That wouldn’t get very far.