The social security tax—also known as FICA (for Federal Insurance Contributions Act)—is no more popular than any other tax; however, it differs in many ways from other taxes. Social security tax dollars are designed to provide a level of financial security for covered workers and their families. The taxes each worker pays are matched dollar for dollar by his employer. Together, these funds are used to pay for four different types of benefits. The full benefit age was 65, and early retirement benefits were first available at age 62, with a permanent reduction to 80 percent of the full benefit amount. Currently, the full benefit age is 66 for people born in 1943-1954, and it will gradually rise to 67 for those born in 1960 or later. The worker’s spouse and dependent children may be eligible for benefits as well. Survivor’s insurance: The social security system also provides life insurance protection. If a covered worker dies, his spouse and children generally are entitled to receive benefits. His parents also may be eligible for benefits if he is their principal source of support. Disability insurance: Of particular importance to a covered worker and his family during his working years, the social security system’s disability benefit assures a covered worker a monthly income if he is unable to work because of an illness or other disability. His spouse and children also may be entitled to payments while he is receiving disability benefits. Medicare: The Medicare program provides both hospital and medical insurance. The medical insurance program imposes a monthly premium; however, the hospital insurance program is free for individuals with a sufficient paid work history. In 2006, Medicare also will provide a prescription drug benefit. Each of these benefits is explained in greater detail in this Guide to Social
Security. The important thing to remember, however, is that social security is not just a retirement plan. It also is a system of replacing lost income due to disability or death. It is supported by the tax dollars of workers and their employers, and it provides benefits regardless of any other benefit plans sponsored by a worker’s employer.