Social Security is funded through payroll taxes; as of 2014, employees and their employers each pay 6.2 percent of wages. Self-employed individuals contribute the total 12.4 percent of earnings toward Social Security tax. Social Security tax applies to up to $117,000 of taxable income.
In 2012, the Social Security Administration collected $590 billion from payroll taxes and earned another $109 billion in interest.
Social Security provides financial retirement benefits. Most people are eligible to collect Social Security if they paid Social Security taxes and have worked for at least 10 years. Individuals are eligible to begin collecting Social Security benefits at the age of 62. However, those who wait to collect Social Security will receive greater benefits. As of 2014, the maximum monthly benefit an individual can receive is $2,642, states Bankrate.
Social Security funds are kept in a trust, and benefits are paid out monthly, depleting funds. As of 2014, the Social Security Board of Trustees estimates that it will no longer be able to make full benefit payments beginning in 2033.
Workers planning on retirement should not rely solely on Social Security benefits but should also regularly contribute to savings accounts, 401(k) plans, IRAs or other investment accounts.