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Basics of Social Security

Jan 18, 2023

Blueprint Income Team

For over eighty years, Social Security has provided Americans with a stream of guaranteed income that gives certainty in retirement. But few people actually understand how the program works. Here’s what you need to know.

  • To qualify for Social Security you must earn enough credits, typically meaning you’ve worked for 10 years
  • Your benefits are calculated based on a multitude of factors
  • You pay taxes during your working years to help fund Social Security

Everyone knows of Social Security, but there’s a surprising amount of misunderstanding about what Social Security is (and is not). We wanted to clear up those misconceptions because understanding Social Security is critical to maximizing your retirement income. So, let’s start with the basics of Social Security.

Social Security Is the Government's Way of Providing You Guaranteed Retirement Income

Social Security is a government-run program and provides qualifying workers a paycheck each month in retirement. While working, you’re required to pay a portion of each paycheck through your taxes, by law per the Federal Insurance Contributions Act (FICA), to help fund Social Security. When you retire, you get a monthly check from the Social Security Administration that will continue for as long as you’re alive.

You Have to Earn Enough Credits to Qualify

As long as you’ve earned enough Social Security credits, typically meaning you’ve worked and paid taxes for at least 10 years, you’ll be eligible for benefits when you retire. You can start receiving benefits as early as 62 or as late as 70 years old.

The Size of Your Benefits Depends on Several Factors

The size of your benefits depends on the number of years you’ve worked, how large your earnings were during those years, the cost of living, and, importantly, at what age you claim your benefits. While there are more granular features of Social Security, knowing these key elements can help you make the decisions to maximize your benefits.

Ultimately, the Social Security program offers benefits beyond the basic retirement paycheck, including Medicare, spousal, and disability.

The Three-Legged Stool

The old retirement adage says that we should use the three-legged stool approach to prepare for retirement:

  1. Social Security – This is the government’s retirement plan for us. As long as you’re working (to earn the credits required addressed above) and paying taxes, you’re earning Social Security credits. When you retire, you’ll start receiving monthly Social Security income that will continue for as long as you’re alive.
  2. Pensions – This is the form employer retirement plans used to take. They provided a steady monthly paycheck no matter what happened in the market and no matter how long you lived. Because Social Security only covers, on average, 40% of one’s retirement expenses, people leaned on pensions for the rest. The problem today is that the second leg of the three-legged stool is wobbly or gone. Instead of offering pensions, employers are providing 401(k)s and matching contributions, which helps with the third stool.
  3. Personal Savings – So that you have access to money outside of, and beyond, monthly Social Security and pension checks, you need to save on your own. This money is generally invested differently to serve two purposes. First, money invested in liquid money market or savings accounts provides a cushion and access to extra cash in case of emergency. Second, money beyond that can be invested in the market for a high potential return. This is the money you’re comfortable losing.

How to Supplement Your Social Security

According to the Social Security Administration, individuals aged 65 and over in the top quartile for income (an average of $78,180) received only 18% of their income from Social Security. So where does the remaining 82% come from?

Purchasing an Income Annuity

Income annuities provide a guaranteed lifetime stream of income during your retirement. You pay a lump sum upfront to purchase your annuity from an insurance company. Then, the insurance company sends you a series of payments for the rest of your life.

How Can I Purchase an Income Annuity?

At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes.

Income Annuity Quotes


From there, you’ll get access to our annuity guides and team of specialists to help you analyze your retirement finances and walk you through the application process.

Blueprint Income Team

We are a team of finance, insurance, and actuarial professionals working to make it easier for everyone to achieve a steady and comfortable retirement. We write about annuities (the good and the bad) and provide strategies to help Americans prepare for retirement.


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