Angelika We have often mentioned in the newsletter that the American Social Security system is one of the few mandatory government insurance programs. It is a true exception in the USA, which is otherwise characterized by private and market-based systems.

American President Franklin D. Roosevelt signed the Social Security Act in 1935 to ensure basic security for all citizens in old age. The Great Depression, which began in 1929 and plunged many households into deep poverty, had changed the mood in the country and paved the way for a European-style social insurance system. However, from the outset, the goal was not to maintain the standard of living through a pension insurance, but to ensure survival and prevent old-age poverty.

If employees don't want to give up their accustomed standard of living in old age, they must supplement the state pension payments in some way. In the past, company pensions offered by firms like General Motors, Ford, or United Airlines were common in America. However, nowadays, more and more companies are trying to get rid of these obligations by using various tricks.

Company pensions are not subject to strict legal protection in the USA. There is a safety fund managed by the organization "Pension Benefit Guaranty Corporation," which functions like reinsurance, guaranteeing retirement payments if companies, for example, go bankrupt. However, these payments are often significantly lower than the promised company pension.

So that leaves only the 401k, which Michael once wrote about in (Rundbrief 08/2003) or traditional saving. For many low-income earners, however, it remains utopian to privately prepare for their retirement. According to a statistic from 2005, 22 percent of today's retirees have to make ends meet with the help of payments from Social Security insurance.

And to give you an idea of how much the average retiree receives from the state insurance: it was 1050 dollars per month in 2007 according to the statistics from the "Social Security Administration," hardly enough to rent a single room in San Francisco.

But how does one qualify for social security? In Germany, you have to pay into the system for at least five years. In the USA, a working individual accumulates what are called Social Security Credits. They need 40 of these to qualify for a pension.

Each year, there are a maximum of four credits (one "credit" per quarter) you can earn. Currently, you must earn at least $1,000 per quarter (increasing to $1,050 in 2008) to receive the credit, and make at least $4,000 in the entire year.

This means (you've surely already calculated it) that it takes 10 years be eligible for a payout. Foreigners who live and work legally in the US are subject to the same rule. However, if they return to their home countries, the American state will only transfer the pension abroad if there is a social security agreement between the USA and the respective country (Rundbrief 08/2007).

In the United States, as in Germany, contributions for social security are deducted directly from the salary by the employer. Employers and employees each contribute equally to the fund, with each paying 6.2% up to an annual salary of $97,500 (as of 2007). Self-employed individuals accordingly pay 12.4%.

In the USA, unlike in Germany, practically everyone is required to have this retirement insurance, and the distribution occurs differently. Low-income earners receive, on average, a higher percentage of their income compared to higher-income earners. There is also a cap on the monthly pension payments. In 2008, it is $2,185 per month, and that's the limit. The pension contributions are transferred to the so-called Social Security Trust Fund, which invests in U.S. Treasury Bonds. Currently, this fund is still in the black. However, according to projections, this will change starting in 2018.

In the USA, both men and women born in 1960 or later reach the full legal retirement age at 67. If one wishes to retire earlier, the American government pays a reduced pension starting at age 62. However, a catch is that the retiree only becomes eligible for the state health insurance for retirees, Medicare, at age 65 (Rundbrief 03/2005)

The American tax administration is ready to collect when a retiree's annual income exceeds $25,000 (or $32,000 for married couples). Income includes half (!) of the pension benefits, as well as, for example, interest income or part-time jobs, since many American retirees are forced to earn extra money. Generously, the retiree is allowed by the Social Security Administration to earn as much as they want without facing pension reductions once they reach full retirement age.

In the U.S., there is also a survivor's pension, which provides for minors and/or disabled children and spouses if the breadwinner dies. However, a widow's pension without minors or disabled children in the household is available at the earliest from age 60. Divorced spouses are also entitled to a survivor's pension if they were married for at least 10 years. During my research, I found also out that social security payments are suspended if the affected retiree is convicted and spends more than 30 days in prison.

President Bush had set himself the goal of privatizing the social security system, but he failed due to public resistance. He eventually gave up, albeit through gritted teeth.

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• More topics you might be interested in:

  	With Extraterrestrials
  	Las Vegas Again And Again
  	Notary Public
  	Urban Abbreviations
  	Lights Out In San Francisco
  	Stock Photos at iStockPhoto.com
  	Newsletter As a Book
  	Blue Angels and the Airbus