Social Security and How it Works
Social Security provides you with a source of income when you retire or if you can’t work due to a disability. It can also support your legal dependents (spouse, children, or parents) with benefits in the event of your death.
What’s Social Security?
Social Security is a program run by the federal government. The program works by using taxes paid into a trust fund to provide benefits to people who are eligible. You’ll need a Social Security number when you apply for a job.
How Do Benefits Work and How Can I Qualify?
While you work, you pay Social Security taxes. This tax money goes into a trust fund that pays benefits to:
- Those who are currently retired
- To people with disabilities
- To the surviving spouses and children of workers who have died
Each year you work, you’ll get credits to help you become eligible for benefits when it’s time for you to retire. Find all the benefits Social Security Administration (SSA) offers.
There are four main types of benefits that the SSA offers:
- Retirement benefits
- Disability benefits
- Benefits for spouses or other survivors of a family member who’s passed
- Supplemental Security Income (SSI)
How to Open a “my Social Security” Account
If you receive or will receive Social Security benefits, you may want to open a “my Social Security” account. This online account is a service from the SSA that allows you to keep track of and manage your SSA benefits. You can also make changes to your Social Security record.
How to Find More Help
If you have specific questions about your Social Security benefits, you can:
- Review the Social Security Administration’s frequently asked questions.
- Contact Social Security Administration directly.
Protecting Your Private Pension Benefits
Read up on how to correct calculation errors. Find out if your pension is covered if the company defaults. See if there’s an unclaimed pension owed to you or someone you know.
Avoid Errors in Pension Calculation and Get Help Fixing Them
If your job is covered by a traditional pension plan, make sure you get the pension amount you’re owed.
- Find ways to protect yourself. Read these 10 common causes of errors in pension calculation.
- Get free legal help if you’re experiencing a problem with your pension plan.
- Find out whether your pension or annuity income is taxable.
- For questions or complaints about your plan, contact your human resources office. Or contact the Employee Benefits Security Administration (EBSA) regional office near you.
Federal Insurance for Private Pensions
If your company runs into financial problems, you’re likely to still get your pension.
The Pension Benefit Guaranty Corporation (PBGC):
- Insures most private-sector defined-benefit pensions. These are plans that typically pay a certain amount each month after you retire.
- Covers most cash-balance plans. Those are defined-benefit pensions that allow you to take a lump-sum distribution.
- Does not cover government and military pensions, 401k plans, IRAs, and certain others.
Is Your Pension Insured?
- Search PBGC’s database of insured plans.
- If your plan is insured and it ends without enough money to pay all benefits, PBGC steps in. PBGC will pay you the money you’re owed, up to legal limits.
- To learn more about PBGC-insured pensions, view these frequently asked questions.
Find an Unclaimed Pension
More than 38 million people in the U.S. haven’t claimed pension benefits they have earned. Find out if you, or someone you know, is owed a pension.
Civil Service Retirement
If you’ve retired from the federal government or plan to, get to know the Office of Personnel Management (OPM)’s retirement services.
Federal Employee Retirement Planning and Management
OPM has information to help you:
- Learn about retirement options
- Find answers to common questions about federal retirement
- Manage your benefits online
Thrift Savings Plan for Current Employees
As a current federal employee, you can contribute to the Thrift Savings Plan (TSP). The TSP offers the same types of savings and tax benefits as a 401(k) plan.
Retirement Credit for Military Service
Military service does not automatically count toward civil service retirement. To receive credit for military service performed after 1956, you must pay a deposit.
Federal Taxes on Government Pensions
Your pension or annuity payment may be taxable. Find out with the online tool Is My Pension or Annuity Payment Taxable?
Survivors of Federal Employees and Retirees
If you’re the survivor of a federal employee or retiree, you may qualify for death and survivor benefits. Visit the OPM website to report the death of a federal employee or retiree and apply for death benefits.
Saving for Retirement
Retirement requires a lot of planning and consideration. In addition to finances, you need to think about when and where you’ll retire. Experts advise that you may need as much as 80 percent of your pre-retirement income to continue your current standard of living. The exact amount will depend on your individual needs.
Questions to Ask Yourself Before Retiring
As you plan, consider these important questions:
- At what age do you plan to retire?
- Can you participate in an employer’s retirement savings plan? This includes 401(k) plans and traditional pension plans.
- If you have a spouse or partner, will they retire when you do?
- Where do you plan to live when you retire? Will you downsize, rent, or own your home?
- Do you expect to work part-time?
- Will you have the same medical insurance you had while working? Will your insurance coverage change?
- Do you want to travel or pursue a costly, new hobby?
Tools to Help You Prepare for Retirement
To begin planning for your retirement:
- Get tips for building your retirement savings in the Department of Labor’s (DOL) Top 10 Ways to Prepare for Retirement (PDF, Download Adobe Reader).
- Use a retirement calculator to find out the best age to claim your Social Security benefits.
- Compare the pros and cons of receiving pension payments monthly or in a lump sum (PDF, Download Adobe Reader).
- Social Security pays benefits that are generally equal to about 40 percent of your pre-retirement earnings. The Social Security Administration helps you estimate your benefits.
- Learn from Investor.gov how you can boost your retirement savings.
- If you have a financial advisor, talk to them about your plans.