Clark Howard

What is a Social Security Number and why do we have one?

Much has been made recently about the importance of protecting your personal information in the aftermath of the Equifax data breach. Among your most private data, is your Social Security number, which is assigned at birth to all Americans.

The unique nine-digit Social Security number (SSN) has become a coveted way to guarantee government benefits and universally identify us all individually. But where did the number come from? How did it originate?

In the midst of the Great Depression, the need arose for the government to provide a system that buoyed the American family even as unemployed people looked far and wide for work. Trying to turn the tide on the destitute state of the U.S. worker, President Franklin D. Roosevelt signed the Social Security Act into law in 1935. One year later, Social Security numbers were born.

Right after its inception, it proved ideal for tracking the earnings of

U.S.

workers as well as determining government benefits. But such a gigantic undertaking didn’t start smoothly, according to the Social Security Administration.

How the Social Security number became so important to Americans

First of all, employers were tasked with deducting taxes from workers’ wages. The swift implementation of payroll tax deductions in January 1937 meant government had to quickly hire and train workers as well as acquire facilities and devise a public education plan for Americans.

Soon, bureaucratic red tape temporarily slowed the Social Security process, with some wondering why the government didn't just use people's names and address as the chief identifiers. As the Social Security Administration summarizes on its website, there were problems with that method:

A 1937 publication recounts, “A recent news account states that the Fred Smiths of New York City have had so much trouble in being identified by their creditors, the courts, and even their friends, that they have joined together in forming the ‘Fred Smiths, Incorporated,’ to serve as a clearing house for their identification problems.”

What do your Social Security numbers mean?

Your Social Security number is comprised of a three-digit area code, a two-digit "group number," and a four-digit serial number.

The area number

The area code (the first three digits of the

SSN

) was designed to indicate a geographic region. One problem that immediately arose with this scheme is that it was confusing for people who worked overseas. For the first three decades of its use, the area number represented the state in which the card was issued. But after 1972, that changed. Since then, “the area number has been assigned based on the

ZIP

code of the mailing address provided on the application for the original Social Security card,” the agency says.

The group number

The group number (the fourth and fifth digits of the

SSN

) is still a unique identifier but is related to the machines and mechanical equipment involved in producing the numbers and verifying the accuracy of punch cards, which were used in the early years.

Serial Number

The serial number is made up of the last four digits of the

SSN

. “The serial number represents a straight numerical series of numbers from

0001–9999 

within each group,” the agency says. One serial number you’ll never see is 0000, which is not assigned.

What are Social Security numbers used for?

When the government devised the Social Security number, it was meant to track work histories and contributions to the U.S. pension system, but things have changed quite a bit in more than seven decades.  SSNs are now used for identification purposes on mostly all official documents, including tax returns to driver’s licenses, bank accounts and more.

Critics have said that the United States should switch to a national identity card system, popularized in much of Europe. The fear is that hackers will eventually crack the code on the nine-digit Social Security algorithm. In July, a group of Carnegie Mellon professors released a study showing that SSNs could be guessed with surprising accuracy.

Combining information about the area code, group number and serial number of particular SSNs allowed the researchers to pinpoint identities with startling accuracy.

"In a world of wired consumers, it is possible to combine information from multiple sources to infer data that is more personal and sensitive than any single piece of original information alone," said project lead Alessandro Acquisti, a researcher in the Carnegie Mellon CyLab.

How can you protect your Social Security number?

The threat of identity theft has made protecting your Social Security number a No. 1 priority. Thieves can unlock untold riches – not only by cleaning out your bank accounts, but generating new lines of credit for ungodly amounts — by getting their hands on your SSN. In that sense, your SSN is the door to your credit.

Money expert Clark Howard says the best way to protect your Social Security number is by freezing your credit, which is the main safeguard against identity theft.

"Credit freezes are one of the most effective ways for consumers to protect themselves against identity theft — and this goes for anyone at any time," he says in his online Credit Freeze Guide.

The guide offers detailed instructions on how to freeze your credit with the three major credit-reporting agencies, Equifax, Experion and TransUnion.

As data breaches become commonplace, consumers can take comfort in knowing that there are ways they can protect themselves and their personal information. For better or for worse, we are left with the Social Security number system until something better comes along.

The Social Security Administration said that more than 450 million original

SSN

s have been issued as of 2008, meaning that nearly every legal resident in America has one.

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