Taking Care of Mom and Dad: How Social Security Works

Almost anyone who works knows that he or she pays into Social Security with every paycheck earned. If your parents are retired, they probably already receive their benefits -- which are based on the earnings recorded under their Social Security numbers.

While your parents worked, their employer withheld Social Security and Medicare taxes from their paychecks, matched that amount, sent those taxes to the Internal Revenue Service (IRS) and reported their earnings to Social Security. If your parents were self-employed, they paid all of their own Social Security taxes when they filed their tax returns and the IRS reported their earnings to Social Security. (They actually paid a rate equal to the combined employee/employer share; but they probably deducted the employer portion as a business expense.)

As you work and pay taxes, you earn "credits" that count toward eligibility for future Social Security benefits. You can earn a maximum of four credits each year. Most people need 40 credits (10 years of work) to qualify for benefits. Younger people need fewer credits to qualify for disability or survivors benefits, as I'll explain later.