Social Security is a federal insurance program, not a savings account

Social Security is a federal program that pays monthly cash benefits to workers who have reached retirement age, to workers who become disabled, and to the families of workers who have died. You pay into it through payroll taxes during your working years. The money you pay does not sit in an account with your name on it — instead, current taxes fund current benefits, and you receive benefits based on your work history and age.

The program started in 1935 and covers about 67 million people in the United States. Most workers pay into it automatically through their paychecks. When you reach a certain age, become unable to work due to disability, or if you die, your family may receive monthly payments from the program.

Social Security is run by the Social Security Administration (SSA), a federal agency. You can reach them at 1-800-772-1213 or visit ssa.gov to learn about your specific situation.

Key Takeaways

  • Social Security pays monthly benefits to retirees, disabled workers, and families of deceased workers based on work history and contributions.
  • You fund Social Security through payroll taxes (6.2% of your wages), and your employer matches that amount.
  • The age at which you can receive full retirement benefits depends on your birth year and ranges from 66 to 67.
  • You can start receiving reduced benefits as early as age 62, but waiting until your full retirement age or later results in higher monthly payments.
  • Social Security is not means-tested, meaning your income or assets do not affect whether you can receive it.

The three types of Social Security benefits

Retirement benefits are the most common type. You receive monthly payments once you reach your full retirement age, which depends on the year you were born. If you were born in 1960 or later, your full retirement age is 67. If you were born between 1943 and 1954, your full retirement age is 66. The SSA has a chart on its website showing the exact age for your birth year.

Disability benefits go to workers under full retirement age who cannot work due to a medical condition expected to last at least 12 months or result in death. You do not have to be elderly to receive disability benefits — you only need to have worked long enough and paid into Social Security. The SSA calls this program SSDI (Social Security Disability Insurance).

Survivor benefits go to family members of a worker who has died. A widow or widower can receive benefits at age 60 (or 50 if disabled). Children under 19 (or 19 if still in high school) can receive benefits. A parent who was dependent on the worker can also receive benefits. The amount each family member receives is a percentage of what the deceased worker would have received.

How much you pay into Social Security

You contribute to Social Security through FICA taxes (Federal Insurance Contributions Act). If you are an employee, you pay 6.2% of your wages up to a certain limit. Your employer pays an equal 6.2%. If you are self-employed, you pay both portions, totaling 12.4%, though you can deduct half of it on your taxes.

The wage limit changes each year. In 2024, you pay Social Security tax on wages up to $168,600. Wages above that amount are not subject to Social Security tax. This means higher earners pay a smaller percentage of their total income into the program.

You also pay 1.45% into Medicare (the health insurance program for people 65 and older). There is no wage limit for Medicare tax — you pay it on all your earnings.

How the SSA calculates your benefit amount

The SSA looks at your 35 highest-earning years of work. It adjusts those earnings for inflation, adds them up, and divides by the number of months you worked. This produces your Primary Insurance Amount (PIA), which is the basis for your monthly benefit.

If you have fewer than 35 years of work history, the SSA counts the missing years as zero, which lowers your average. You need at least 10 years of work (40 quarters of coverage) to receive retirement benefits at all. For disability benefits, the requirement is shorter — it depends on your age when you become disabled.

The exact formula the SSA uses is complex and changes slightly each year. You can see an estimate of your own benefit by creating an account at ssa.gov and viewing your Social Security Statement. The statement shows your work history and an estimate of what you might receive at different ages.

When you can start receiving benefits

You can start receiving retirement benefits as early as age 62, but your monthly payment will be permanently reduced — typically by about 30% if you were born in 1960 or later. The longer you wait, the higher your monthly payment becomes. If you wait until age 70, your benefit is about 24% higher than if you had waited until your full retirement age.

This trade-off means that someone who claims at 62 receives more total money over their lifetime only if they die before their mid-80s. Someone who lives into their 90s typically receives more total money by waiting. There is no single "right" age to claim — it depends on your health, family history, and financial situation.

You can work while receiving Social Security, but if you claim before your full retirement age and earn above a certain amount, the SSA will reduce your benefits temporarily. Once you reach your full retirement age, there is no earnings limit — you can work as much as you want without affecting your benefit.

Social Security and taxes

Social Security benefits may be subject to federal income tax, depending on your total income. If your income is below a certain threshold, your benefits are not taxed. If your income is above that threshold, up to 85% of your benefits may be taxable. The threshold amounts have not changed since 1984, so more beneficiaries are affected each year as incomes rise.

State taxes vary. Some states do not tax Social Security at all. Others tax it the same way the federal government does. A few states have their own rules. You can check your state's tax rules on your state revenue or tax department website.

How to get your Social Security Statement

Your Social Security Statement shows your work history, how much you have paid into the program, and estimates of what you might receive at different ages. You can view it online by creating a my Social Security account at ssa.gov. The process takes about 10 minutes and requires your Social Security number, email address, and a way to verify your identity.

If you do not have internet access or prefer not to create an account, you can call the SSA at 1-800-772-1213 and ask them to mail you a statement. It typically arrives within two weeks.

You should review your statement every few years to make sure your work history is correct. If you see an error, contact the SSA right away — correcting mistakes is easier the sooner you report them.

Frequently Asked Questions

Can I receive Social Security if I did not work in the United States?

You need 10 years of work history in the United States to receive retirement benefits. If you worked in another country, those years may not count toward Social Security. However, the United States has agreements with some countries that allow work in those countries to count. Contact the SSA to learn whether your work history qualifies.

What happens to my Social Security if I die before I start receiving benefits?

Your family members may still receive survivor benefits based on your work history. A widow or widower, children under 19, and dependent parents can all receive payments. The total amount paid to your family is limited to about 150% to 180% of what you would have received, depending on family size.

Can I change my mind after I start receiving Social Security?

If you claimed benefits within the last 12 months, you can withdraw your claim and repay what you received. This resets your benefit amount as if you had never claimed. After 12 months, you cannot withdraw, but you can suspend your benefits at your full retirement age and let them grow until age 70.

Does Social Security count as income for other programs?

Social Security is counted as income for some programs (like Supplemental Security Income and certain housing programs) but not for others (like Medicare). The rules vary by program. Contact the specific program to learn how they treat Social Security income.

What if the SSA made an error on my record?

Contact the SSA as soon as you notice an error in your work history or earnings record. You can call 1-800-772-1213, visit your local Social Security office, or create an account at ssa.gov to report it. Errors are easier to fix the sooner you report them, especially if they happened more than three years ago.