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Is social security a pension plan?

Is social security a pension plan?

| Jan 12, 2018 | social security disability |

People often think about social security as if it is a pension plan. You pay a tax, which is similar to a contribution. It goes into the plan. When you retire, you get payments. This is very similar to any other retirement plan and it’s the reason people are sometimes glad to contribute, thinking that, as with other plans, their payments will be higher if their input is higher.

However, it’s very important to remember that social security is not a pension and was never intended to be one. It was set up as a tax, not a retirement plan. That doesn’t mean people can’t benefit from it, but thinking of it the same way is problematic.

The system was established during the Great Depression, the hardest economic time to hit the United States. It was worse than the recent recession that began in 2008 and 2009, and many people were out of work.

The lack of general economic stability made things very hard for those who had already retired — likely thinking they’d do very well after the prosperity of the 1920s and before the stock market crash — or those who were disabled. No one had enough to go around, and they certainly did not. As such, social security focused on taxing those Americans who were in the workforce, creating a benefits program for those who were disabled or retired. This is still the primary focus today, though there have been changes over the years, but it’s not a pension plan.

When considering social security disability benefits, it’s important to know exactly what legal options you have.

Source: New York Times, “Is It Really a Pension? It’s a Problem,” Floyd Norris, accessed Jan. 12, 2018