Social security number

What Is a Social Security Number?

A Social Security number (SSN) is a unique nine-digit numerical identifier issued by the U.S. government to citizens and eligible residents. While originally created to track earnings for Social Security benefits, it has evolved into a cornerstone of personal identification in the United States, deeply integrated into various aspects of personal finance and identity management. The Social Security Administration (SSA) is the agency responsible for issuing these numbers.

The SSN plays a critical role in distinguishing individuals within government databases and in the private sector. It helps to accurately record an individual's earnings throughout their working life, which are then used to determine eligibility for and the amount of Social Security and Medicare benefits³⁶. Beyond its initial purpose, the Social Security number is frequently required for transactions with financial institutions, applying for credit, and filing tax returns.

History and Origin

The Social Security number was established as part of the Social Security Act of 1935, a landmark piece of legislation signed by President Franklin D. Roosevelt. This act created the Social Security program, designed to provide economic security through retirement and disability benefits during the Great Depression. To effectively administer these programs and accurately track individual earnings, a system for unique identification was necessary³⁴, ³⁵.

The first Social Security numbers were issued in November 1936, with over 25 million numbers assigned by the end of 1937³², ³³. Initially, the primary purpose was solely for tracking earnings for Social Security benefits³¹. However, its utility quickly expanded. During World War II, the federal government began using SSNs for tax purposes and rationing programs. By the 1960s, its use broadened to include other government initiatives like Medicare, and in 1961, the Civil Service Commission adopted the SSN as an official federal employee identifier. The Internal Revenue Service (IRS) followed suit in 1962, requiring SSNs on tax returns³⁰.

Historically, the first three digits of an SSN indicated the geographic area where it was issued. However, in 2011, the Social Security Administration introduced a randomization system for assigning SSNs to enhance privacy and extend the longevity of available numbers, eliminating any geographic significance²⁹. More information on the history of the Social Security Act and its numbers can be found on the Social Security Administration's historical brief²⁸.

Key Takeaways

• A Social Security number (SSN) is a nine-digit identifier issued by the U.S. government to track earnings and determine eligibility for Social Security benefits.
• It serves as a de facto national identification number, essential for employment, banking, credit, and filing taxes.
• The SSN originated with the Social Security Act of 1935 to manage the new federal benefits program.
• Protecting your Social Security number is crucial for preventing identity theft and other financial fraud.
• The Social Security Administration (SSA) is the federal agency responsible for issuing and maintaining SSNs.

Interpreting the Social Security Number

Unlike financial metrics that are interpreted for performance or value, a Social Security number is an immutable identifier. It does not convey any quantitative meaning about an individual's wealth, creditworthiness, or employment history. Instead, its "interpretation" lies in its function as a unique key used to access and link various records pertaining to an individual.

When a financial institution or government agency requests a Social Security number, it is generally to verify identity, track financial activity, or access specific records such as a credit report, employment history, or benefit eligibility. Its nine digits serve as a direct link to an individual's official records, allowing for accurate data matching across different systems.

Hypothetical Example

Imagine Sarah, a new college graduate, is starting her first job and simultaneously looking to open an investment accounts to begin her retirement planning.

1. Employment: When Sarah completes her employment paperwork, her employer requires her Social Security number. This allows the employer to accurately report her wages to the IRS for tax purposes and to the Social Security Administration, contributing to her future Social Security benefit payments.
2. Banking and Investing: Sarah goes to a bank to open a new checking account and a brokerage firm to set up her investment account. Both institutions request her Social Security number. This is a standard Know Your Customer (KYC) requirement, enabling them to verify her identity, comply with anti-money laundering regulations, and accurately report any income generated from her accounts to the IRS. Without her Social Security number, Sarah would not be able to open these accounts or legally work.

Practical Applications

The Social Security number is a ubiquitous identifier in the U.S., with numerous practical applications across personal and financial domains:

• Employment: Employers are legally required to collect an employee's Social Security number to report wages to the IRS and the Social Security Administration for tax and benefit tracking purposes²⁶, ²⁷.
• Taxation: The SSN is the primary taxpayer identification number used for filing federal income tax returns and reporting income to the IRS²⁵.
• Government Benefits: It is essential for applying for and receiving government benefits, including Social Security retirement, disability, and survivor benefits, as well as Medicare and Medicaid²⁴.
• Financial Services: Opening bank accounts, applying for loans (e.g., mortgages, car loans, student loans), obtaining credit cards, and engaging in other financial transactions almost always require an SSN for identity verification and credit checks²³.
• Credit Reporting: The SSN is used by credit bureaus to track an individual's credit history and generate credit reports, which lenders use to assess creditworthiness²².
• Healthcare: It is often used for health insurance enrollment and medical billing purposes.
• Driver's Licenses and Passports: Many states use the Social Security number as part of the application process for a driver's license, and it may be required for passport applications²¹.

The Social Security Administration provides detailed information on the various uses of the Social Security number on its official website²⁰.

Limitations and Criticisms

Despite its widespread utility, the pervasive use of the Social Security number presents significant limitations and criticisms, primarily concerning privacy and security. The greatest risk associated with the Social Security number is its role in identity theft¹⁹. Because the SSN is so widely used as an identifier, its compromise can lead to severe financial and personal consequences. If fraudsters obtain a Social Security number, they can use it to open new lines of credit, file fraudulent tax returns, access existing accounts, or obtain medical services, significantly jeopardizing an individual's financial security¹⁸.

Critics argue that the SSN was never intended to be a national identifier and that its expanded use creates a single point of failure for personal data security. This widespread reliance makes it a prime target for cybercriminals and can complicate efforts in estate planning and protecting personal identifiable information. Individuals are advised to protect their Social Security number carefully, avoiding carrying their Social Security card and being cautious about sharing the number unless absolutely necessary¹⁶, ¹⁷. The Federal Trade Commission (FTC) offers resources and advice on preventing identity theft related to SSNs¹⁵.

Social Security Number vs. Individual Taxpayer Identification Number (ITIN)

While both are nine-digit numerical identifiers used for tax purposes in the United States, the Social Security number (SSN) and the Individual Taxpayer Identification Number (ITIN) serve different populations and purposes.

The key distinction is that an SSN authorizes employment and is necessary for most government benefits, while an ITIN is solely for tax processing for individuals who do not qualify for an SSN¹¹, ¹², ¹³. The IRS issues ITINs to ensure that all individuals, regardless of immigration status, who have U.S. tax obligations can comply with tax laws¹⁰.

FAQs

What is the primary purpose of a Social Security number?

The primary purpose of a Social Security number (SSN) is to track an individual's earnings history for Social Security benefit calculations, including retirement, disability, and survivor benefits. It also serves as a crucial identifier for tax purposes and many other financial institutions and government services.

Is it safe to carry my Social Security card with me?

It is generally not recommended to carry your Social Security card with you unless absolutely necessary. Memorize your Social Security number instead, and keep the physical card in a secure place at home with other important documents. This reduces the risk of your number being compromised if your wallet or purse is lost or stolen⁸, ⁹.

Can someone get a job without a Social Security number?

In most cases, a Social Security number is required for legal employment in the United States. Employers use the SSN to report wages and comply with tax laws⁶, ⁷. Individuals who are not eligible for an SSN but have U.S. tax obligations may obtain an Individual Taxpayer Identification Number (ITIN), but an ITIN does not authorize employment⁵.

How can I protect my Social Security number from identity theft?

To protect your Social Security number, avoid sharing it unnecessarily, shred documents containing it, and use strong passwords for online accounts. Regularly check your credit report for suspicious activity. If you suspect your SSN has been compromised, you can contact the Social Security Administration to block electronic access to your record and consider placing a fraud alert or security freeze on your credit reports², ³, ⁴.

Do I need a Social Security number to file federal income tax?

Yes, a Social Security number is generally required for individuals to file federal income tax returns. If an individual is not eligible for an SSN but has a U.S. tax filing requirement, they must obtain an Individual Taxpayer Identification Number (ITIN) from the IRS¹.