Do you know how Social Security is funded? During your working years, you have a deduction from your wages called FICA (Federal Insurance Contribution Act). It is withheld to fund the Social Security and Medicare programs. The current rate of withholding is 7.6 %. Your employer pays an additional 7.65%.
The deduction goes toward funding the Social Security benefits for retired people and their eligible spouses and children, disabled people and their eligible spouses and children, and for families of people who have died.
Your FICA contributions also pay for Medicare hospital insurance. Medicare is the country’s health insurance program for people age 65 or older. People younger than 65 with certain disabilities or permanent kidney failure can also qualify for Medicare.
Social Security covers an estimated 165 million workers. The program pays benefits to about 40 million retired workers, 9 million workers with disabilities, and 6 million survivors of workers who have died. It also helps about 5 million dependent family members.
Social Security also administers another program called Supplemental Security Income (SSI) which pays benefits to the disabled (children and adult) and those over age 65 who have low income and resources. FICA deductions do not fund this program. The funding comes from the general tax revenues.
Social Security is a social insurance program, but SSI is a safety net program. Because the two programs are different, they have different funding sources.