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

Social Security is a federal insurance program run by the Social Security Administration (SSA). It pays monthly cash benefits to workers who have reached retirement age, to workers who become disabled before retirement, to the spouses and children of retired or disabled workers, and to the surviving family members of workers who have died. You do not need to be poor to receive it — it is based on your work history and the taxes you and your employers paid into the system, not on how much money you have now.

The program began in 1935 and has been the largest source of income for most people over 65 in the United States ever since. It is funded by payroll taxes: you and your employer each pay 6.2 percent of your wages, and self-employed people pay 12.4 percent. That money goes into a trust fund that pays current beneficiaries. When you work, you earn credits toward your own future benefits — you need 40 credits (roughly 10 years of work) to be may be able to access for retirement benefits.

Social Security is not the same as Supplemental Security Income (SSI), which is a separate program for people with low income and limited resources. The two programs have different rules, different benefit amounts, and different process processes.

Key Takeaways

  • Social Security pays monthly benefits based on your work history and the payroll taxes you paid, not on financial need.
  • You earn credits toward benefits by working and paying Social Security taxes — you need 40 credits to be may be able to access for retirement benefits.
  • The program pays retirement benefits, disability benefits, survivor benefits for family members, and spousal and child benefits.
  • You can start receiving retirement benefits as early as age 62, but your monthly payment will be smaller than if you wait until your full retirement age or later.
  • Social Security is separate from SSI (Supplemental Security Income) and Medicare, though the three programs often work together.

The four types of Social Security benefits

Retirement benefits are paid to workers age 62 and older who have earned 40 credits. Your monthly payment depends on how much you earned during your working years and when you start taking benefits. If you were born in 1943 or later, your full retirement age (the age at which you receive your full benefit amount) is between 66 and 67, depending on your birth year. You can start benefits earlier at 62, but your payment will be permanently reduced. You can also delay benefits past your full retirement age and receive a larger payment.

Disability benefits (SSDI) are paid to workers under full retirement age who have a medical condition expected to last at least 12 months or result in death, and who have earned enough credits. The number of credits you need depends on your age when you become disabled — younger workers need fewer credits. Your family members may also receive benefits on your work record if you are receiving disability benefits.

Survivor benefits are paid to the family members of a worker who has died. A widow or widower can receive benefits at age 60 (or 50 if disabled), a surviving spouse caring for a child under 16 can receive benefits at any age, and unmarried children under 19 (or 19 if still in high school) can receive benefits. The total amount paid to a family is limited to about 150 to 180 percent of what the worker would have received.

Spousal and child benefits are paid to the spouse and children of a worker who is receiving retirement or disability benefits. A spouse can receive up to 50 percent of the worker's benefit amount at full retirement age, and children can each receive up to 50 percent. These benefits do not reduce the worker's own payment.

How your benefit amount is calculated

The Social Security Administration looks at your highest 35 years of earnings (adjusted for inflation) and calculates an average. From that average, they explore a formula that gives you a larger percentage of your lower earnings and a smaller percentage of your higher earnings — this is called the Primary Insurance Amount (PIA), and it is the basis for all your benefits and your family members' benefits.

Your actual monthly payment depends on when you start taking benefits. If you start at 62, you receive about 70 percent of your PIA (the exact percentage depends on your birth year). If you wait until your full retirement age, you receive 100 percent of your PIA. If you wait until 70, you receive about 124 percent of your PIA. The longer you wait, the higher your monthly payment — but you also receive fewer total payments over your lifetime if you die early, so the choice depends on your health, family history, and financial situation.

You can see your estimated benefit amount by creating an account on ssa.gov and viewing your Social Security Statement. The statement shows your earnings record, your estimated retirement benefit at different ages, and your estimated disability and survivor benefits.

Work credits and how you earn them

A work credit is a record that you worked and paid Social Security taxes in a given year. In 2024, you earn one credit for every $1,730 of wages or self-employment income, up to a maximum of four credits per year. The amount needed to earn a credit changes each year. You need 40 credits total to be may be able to access for retirement benefits — that is roughly 10 years of full-time work, though the credits do not have to be consecutive.

For disability and survivor benefits, you do not always need 40 credits. If you become disabled before age 24, you may need only six credits earned in the three years before you became disabled. If you become disabled between 24 and 31, you generally need credits for half the years between 21 and the year you became disabled. At 31 and older, you need 20 credits earned in the 10 years before you became disabled.

You can check your work record and the credits you have earned by viewing your Social Security Statement online. If you see an error — a year you worked but no credits were recorded, or credits recorded under the wrong name — you should report it to the SSA as soon as possible, because there are time limits for correcting records.

How Social Security fits with other programs

Social Security is separate from Medicare, the federal health insurance program for people 65 and older. You become may be able to access for Medicare at 65 regardless of whether you are receiving Social Security benefits, and you must sign up during your initial enrollment period or pay a late penalty. If you are receiving Social Security, you will be automatically enrolled in Medicare Parts A and B at 65 unless you opt out.

Social Security is also separate from Supplemental Security Income (SSI), which is a needs-based program for people with low income and limited resources. You can receive both Social Security and SSI if your Social Security benefit is small enough, but SSI has strict limits on how much money and property you can own. If you receive SSI, your Social Security benefit will reduce your SSI payment dollar-for-dollar (after a small exclusion).

Some people who worked for the federal government, a state or local government, or a railroad may have pensions that are not covered by Social Security. If you receive one of these pensions, your Social Security spousal or survivor benefits may be reduced under rules called the Government Pension Offset and the Windfall Elimination Provision.

When and how to start receiving benefits

You can start receiving retirement benefits as early as age 62, but you must formally request them. You cannot receive benefits automatically — you have to contact the Social Security Administration and go through a process to begin your payments. You can start the process online at ssa.gov, by phone at 1-800-772-1213, or in person at your local Social Security office.

If you are still working when you start benefits before your full retirement age, your benefits will be reduced if your earnings exceed a certain limit. In 2024, if you are under full retirement age for the entire year, your benefits are reduced by $1 for every $2 you earn above $23,400. The year you reach full retirement age, benefits are reduced by $1 for every $3 you earn above $62,400 (but only counting earnings before the month you reach full retirement age). Once you reach your full retirement age, there is no limit on how much you can earn.

If you are receiving disability benefits and you return to work, you have a trial work period of nine months during which you can earn any amount without losing benefits. After that, your benefits will stop if your earnings are substantial, though you may be able to continue Medicare coverage for a limited time.

Frequently Asked Questions

Can I receive Social Security if I did not work for 10 years?

You need 40 credits to receive retirement benefits, which is roughly 10 years of full-time work. If you have fewer than 40 credits, you cannot receive retirement benefits on your own record. However, you may be able to receive spousal or survivor benefits on someone else's record if you are married to or a widow or widower of someone who is may be able to access.

What happens to my Social Security if I work after I start receiving benefits?

If you are under full retirement age and still working, your benefits will be reduced if your earnings exceed the annual limit (in 2024, $23,400). Once you reach full retirement age, you can earn any amount without losing benefits. If you are receiving disability benefits, you have a nine-month trial work period during which earnings do not affect your benefits.

How do I check my work record and credits?

Create an account on ssa.gov and view your Social Security Statement. It shows your earnings history, the credits you have earned, and your estimated benefits. If you see an error, contact the SSA right away — there are time limits for correcting records.

Is Social Security the same as SSI?

No. Social Security is based on your work history and payroll taxes. SSI is a needs-based program for people with low income and limited resources. The two programs have different rules, different benefit amounts, and different process processes, though you may be able to receive both.

When should I start taking Social Security benefits?

The answer depends on your health, family history, financial situation, and whether you are still working. Starting at 62 gives you more total payments over time if you live a long life, but a smaller monthly amount. Waiting until 70 gives you a larger monthly amount but fewer total payments. Your Social Security Statement shows your estimated benefit at different ages to help you decide.