Social Security is structured to replace a portion of beneficiaries' wages lost due to retirement, disability or death. Social Security benefits are calculated based on a retiree's earnings history and are intended to replace, on average, 42% of their peak salary.

The system is also designed to be progressive so that lower income workers receive a greater portion of their previous earning level than do higher income earners.

If workers retire early, their benefits are reduced for each month of benefits received before age 65. The cutback amounts to a 20% reduction for those who start collecting benefits at age 62. Workers who postpone retirement and remain in the workforce after age 65 qualify for inflated benefits, to reflect the additional years of contributions.

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