Social Security Number
Social Security Number is a unique 9-digit number. It's asked for when applying for a credit card, completing a job application, or more. It's because it is one of the most important pieces of the identification of information. There are many ways in which which one can use the number. There are also many reasons why one must have the number. This is why, to have it, it's important. Here, we will take a close look at how it all works. Or what is this number, and why is it this important?
What is Social Security Number?
As said above, it's a 9-digit number. In order terms, this is the numerical identifier that gets assigned to the citizens of the USA. It helps the residents to track their income and to determine their available benefits.
Created in the year 1936, the number was part of The New Deal. The original purpose of it was to track the earnings and to offer retirement. It also was for providing disability benefits. But today, the SSNs are used for credit reports, tax purposes, identification needs, etc.
SSNs have 3 important parts. They are,
- 1st 3 digits denote Area Number
- The Next 2 digits denote the Group Number, and
- The Last 4 digits show the Serial Number
The SSNs are issued by the Social Security Administration or SSA. These numbers since 2011 have been random.
Why do You Need an SSN?
Now that you know what is Social Security Number is, now it's crucial to know why you need it. SSN is quite crucial to,
- Track work history and earnings. It's then used to calculate the governmental benefits of the individual in the future. Like it can be retirement income, health insurance, disability income, or more.
- Employers who collect SSNs at the time of hiring. They use it to report the salary payments. They also use it for reporting tax withholdings to the state tax authorities and the IRS.
- SSA, as they use the earning history of the individuals. They also use it to keep track of the adjusted wages of the individuals. It helps them with computing social security benefits.
Social Security Benefits
As said, SSNs were created initially to keep track of earnings and to determine the benefits. The benefits were calculated via average indexed monthly earnings over around 35 years. If one started to work at 16, SSA tracks earnings from that year while adjusting any wage changes over the years. The full retirement age, it varies. But it is 67 for ones born in the year 1960 or later. One can begin to receive the benefits at 62 years of age. But the amount gets reduced later. So, delaying the benefits till the age of 70 increases the payout.
Social Security Numbers and Identity Theft
SSNs are used as personal identifiers. They help to get credit, too. So it makes them susceptible to fraud and identity theft. The notable example here is of LifeLock CEO, who shared his SSN with the public. The CEO wanted to show the effectiveness of the company but instead ended up losing his identity. It happened multiple times. The legislators are now considering separating certain activities. It includes renting an apartment, getting a hunting license, etc., using SSN. It's expected to reduce the fraud risk.
Bottom Line
To conclude, SSNs are important to track income, determine benefits, and more. While these numbers facilitate different functions, they also bring identity theft risks. It thereby underscores the need for its careful management/protection. Understanding the significance and the use of the SSN also helps. It will ensure maximized benefits and minimize potential risks.
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