Final answer:
The Social Security earnings test applies only to workers between age 62 and the normal age of retirement, not to all retirees, nor does it tax earned income at 25 percent. It reduces benefits for those not at full retirement age with income above certain thresholds. Social Security is a crucial part of the U.S. social insurance system, providing benefits to retirees, disabled individuals, and dependents.
Step-by-step explanation:
The correct answer to the question about the Social Security earnings test is that it applies only to workers between age 62 and the normal age of retirement. This means the first option is the correct one. The Social Security earnings test does not apply to all retirees receiving Social Security benefits, nor does it tax earned income at 25 percent. Instead, it reduces the benefits of those who have income from work above a certain threshold if they have not yet reached their full retirement age, which has been increased over time from 65 to 67 for workers born after 1959.
The Social Security program is a key part of the United States social insurance program, designed to provide financial stability for retirees, disabled individuals, and the dependents of deceased workers. Benefits are primarily funded through a payroll tax, where both employees and employers contribute. The program is not intended to fully replace income in retirement, but to act as a supplement, averting poverty among the elderly and disabled.
Given the demographic changes and the increasing number of retirees, there is concern about the long-term sustainability of the Social Security trust fund. Policy changes like gradually increasing the full retirement age and payroll taxes have been implemented in the past to help sustain the program.