What is Social Security?

Social Security in the US (AHV/AVS in Switzerland, NI in the UK) is a government-run social-insurance programme that provides retirement, disability and survivor benefits to qualifying workers and their families, funded through payroll taxes.

US Social Security pays retirement benefits from age 62 (reduced) to 70 (maximum), with full retirement age 67 for those born after 1960. Each year delayed past full retirement age increases the benefit by 8%, making delay one of the highest-return decisions in personal finance for those who can afford to wait.

Switzerland's 1st pillar (AHV) covers basic pension up to about CHF 2,520/month maximum, designed to cover essentials. The 2nd pillar (occupational pension) and 3rd pillar (private) build on top.

Example

A US worker entitled to USD 2,500 at full retirement age 67 receives only USD 1,750 if claiming at 62, but USD 3,100 if delaying to 70 — a 77% increase for waiting 8 years.

Related terms

Retirement Planning

Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve them — covering savings, investments, insurance, taxes and withdrawal strategy.

Roth IRA

A Roth IRA is a US individual retirement account funded with after-tax dollars, in which contributions and earnings grow tax-free and qualified withdrawals in retirement are entirely tax-free.

401(k)

A 401(k) is a US employer-sponsored retirement account that lets employees contribute a portion of pre-tax (Traditional) or after-tax (Roth) salary, typically with an employer matching contribution, growing tax-deferred or tax-free until retirement.

Annuity

An annuity is an insurance contract in which the buyer pays a premium (lump sum or instalments) and the insurer pays a series of guaranteed periodic payments — for a fixed period or for life — typically used for retirement income.

Frequently asked questions

When should I claim?+

Delay until 70 if you have other income, expect long life and good health. Claim earlier if you need the income or have shortened life expectancy.

Will Social Security run out?+

US trust funds project shortfalls in the early 2030s without legislative action; benefits will not disappear but may be reduced.

Is the benefit taxable?+

Yes in the US for higher-income retirees; up to 85% can be subject to federal income tax.