Social Security refers to a program established by the 1935 Social Security Act (SSA) that provides financial support to Americans of retirement age.

Social Security is a bit like a mandatory savings plan: the government takes a percentage of your income and redistributes it to current retirees, under the assumption that one day, you too will receive these benefits. Provided you or your spouse work enough years, Social Security benefits are a source of guaranteed income.

How does Social Security work?

Everyone who works contributes to Social Security. The government withholds a small percentage of each paycheck you receive. Those payments add up and benefit today’s retirees—just as the next generation’s contributions will benefit you.

While most employees pay into Social Security, you must make a certain amount of money over your lifetime to be eligible for benefits. This income requirement is tracked through a credit system maintained by the U.S. Government, actively rewarding 1 “credit” for every $1,200 earned. As of 2014, you need 40 credits, plus you need to have worked 10 years or more, and be over 62 to receive benefits, according to the Social Security Administration.

Benefits of Social Security

While you can start taking Social Security benefits at age 62, delaying does pay off. The longer you defer your benefits past age 62, the bigger they are. For this reason, many people devise income strategies to allow them to delay taking benefits as long as possible to maximize their Social Security payout. However, at age 70, the deferral increases stop and there are no additional advantages to delay receiving any Social Security benefits for which you are eligible.

Risks of Social Security

Your employment status and the age at which you start collecting your Social Security benefits can significantly impact your payout. If you start collecting the minute you’re eligible, you may end up with a lowered benefit.

Social Security considerations

To get the most out of Social Security, you’ll need to plan how long you’ll be working and at what age you’ll start collecting benefits. If you want to keep working into your 60s and 70s, you may want to hold off on collecting, since benefits provided to part- or full-time workers are reduced proportionate to income (as of 2014, any annual income over $15,480 necessitates an adjustment, according to the Social Security Administration).

Deciding to collect or not takes a realistic assessment of your financial stability and your health—including condition, genetics, lifestyle choices, and other factors.

And while Social Security boosts your income, the program was never meant to be a retiree’s sole source of income. Most people explore other non-guaranteed and guaranteed sources of income, such as stocks, 401(k)s, and annuities to supplement their Social Security benefits.