Social security is the foundation of economic security for millions of Americans, according to the National Academy of Social Insurance. It is a pay-as-you-go program where today's workers pay Social Security taxes into the program, and money then flows out as monthly income payments to beneficiaries.
In 2013, around 158 million Americans paid Social Security taxes, and around 57 million people collected monthly benefits, reports the National Academy of Social Insurance. That equates to about one in four households that received and still receive Social Security income today. Social Security differs from other company pensions in that it is not prefunded.
Social Security is paid for by workers and employers. Workers pay 6.2 percent of their earnings into the program, up to a cap of around $100,000. Higher-income Social Security beneficiaries also pay federal income taxes on their benefit income. These taxes also help pay for Social Security.
In 2012, Social Security paid $768 billion in benefits to retired workers, disabled persons and dependents of retired, disabled or deceased workers. Full retirement age had been 65 for many years, says the Official Social Security Website; however beginning with people born in 1938 or later, that age is gradually increasing until it reaches 67 for people born after 1959.