07/24/2014 11:55 am ET Updated Sep 23, 2014

Social Security Benefits Made Easy, Part 2


Baby Boomers...Did you get a chance to read this blog on Social Security benefits made easy?

How did you do on the AARP quiz?

I told you things were not as simple with our Social Security system as we had hoped.

So, do you have any idea where the whole thing started?

Are you even interested?

Well, just in case you find yourself cornered in a high-brow conversation at a cocktail party with several other boomers discussing the history of social welfare and government reforms, here's a quick overview of the birth of our wonderful federal program.

A small scale version of Social Security insurance was developed as a program during the Great Depression of the 1930's.

Strangely enough, the economic scenario our country was much the same as the mid 2000's we just lived through.

The great stock market crash of 1929 had destroyed the value of many Americans' retirement savings.

IRA's dwindled, banks failed and personal financial futures became despondent overnight.

All that was missing was a major housing bubble collapse, huh?

In 1929, the poverty rates among senior citizens exceeded 50 percent.

Things did not look good for the future of senior citizens in the U.S.

President Franklin D. Roosevelt became the first U.S. president to advocate federal assistance for the senior citizen demographic by signing into law the Social Security Act in August, 1935 as part of the "New Deal" program.

The Act was a part of Roosevelt's plan to combat the growing instabilities in the modern American culture, including advanced aging, poverty and unemployment.

The SSA provided health and financial benefits to retirees and the unemployed including comprehensive insurance payments at death.

These payments to existing retirees were to be funded by a payroll tax on current worker's wages, half as a payroll tax and half paid by the employer.

The act also gave money directly to the states to provide financial programs and assistance to senior citizens in the form of unemployment insurance, aid to families with dependent children, maternal and child welfare, public health services and services for the blind.

Believe it or not, The Social Security Act (SSA) was only 37 pages long when first approved.

It has blossomed some over the years hasn't it?

The very first social security cards were issued in 1937.

Some 20 million were issued in first year .

In 1939, the funding for this program was restructured and handed over to the Internal Revenue Service and renamed the Federal Insurance Contributions Act (FICA).

Social Security payroll taxes are thus often referred to as "FICA taxes."

If you want my opinion, I think the Internal Revenue Service owns everything and runs everything in this country (and a few small third world countries as well).

In 1940, the first monthly benefit check was issued to Ida Mae Fuller for $22.54.

Sorry, but she is so cute.

She looks just like my Grandmother.

There have been other updates over the years to keep up with the growing pains of the program.

Benefits increased and regular cost of living adjustments (COLAs) were established in 1950.

The first attempt at a disability program was added to Social Security in 1954

The early retirement age was lowered to age 62 with reduced benefits in the early 60's.

In 1965, Medicare health care benefits were added to the same program.

Over 20 million senior citizens signed up for benefits in the first three years of the new program so a Medicare tax of 0.7% was added to pay for increased Medicare expenses.

In 1972, the Supplemental Security Income (SSI) program became a federal program and was assigned to Social Security Administration.

So, now that you know everything that is important to know about the formation of the Social Security system, there are two things to remember for your next cocktail party conversation:

1. The Social Security benefits that you are entitled to receive are actually a form of insurance that you pay into the system through your FICA taxes.

  • You become eligible to receive these benefits by accumulating credits by paying FICA taxes.
  • You receive one credit for every $1,200 of earnings in a calendar year.
  • You can earn a maximum of four credits a year.
  • You need at least 40 credits to be eligible.
  • The number of credits you need to be eligible for benefits depends on your age and the type of benefit.

2. There are actually five different benefit programs under the umbrella of the Social Security program.

Each has its own qualifications, requirements and benefit structures.

These include:

  • Retirement Benefits
  • Disability Benefits
  • Survivor's Benefits
  • Medicare Benefits


  • Supplemental Security Income

Hopefully, this is not all incredibly boring to you because it is a very important program to understand and can play a very important role in your retirement financial plans.

Tomorrow we will begin to dig a little deeper into these different benefit programs, how you qualify and what resources are available to you.