What is Social Security and how does it work?

Social Security has been around for close to a century.

In 1935, then-President Franklin D. Roosevelt signed the Social Security Act into law, forming a government program designed to provide financial support to the country's retired workers.

Roosevelt stated the following upon signing the legislation: "We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age."

Social Security has evolved over time, and it's now touted by the government as "one of the most successful anti-poverty programs" in American history. In 2024, the Social Security Administration estimates that an average of nearly 68 million Americans per month will receive a benefit. Those beneficiaries aren't just retired workers, either.

So who is eligible for Social Security and at what age? And how much are the payments? Here's what to know about Social Security:

What is Social Security?

Social Security provides financial benefits to retired workers, people with qualifying disabilities, survivors of workers who have died and the dependents of beneficiaries.

Retired workers and their dependents accounted for 77.8% of total benefits paid in 2023, according to the Social Security Administration. Disabled workers and their dependents made up 11% of total benefits paid while survivors of deceased workers accounted for 11.2%.

What is the Social Security tax?

The program is financed by American workers through payroll taxes. Employers and employees each pay 6.2% of their earnings (up to the 2024 taxable maximum of $168,600) in Social Security taxes. Those who are self-employed pay a 12.4% tax.

The Social Security Administration says around 85 cents of every Social Security tax dollar paid goes to the Old-Age and Survivors Insurance (OASI) Trust Fund that benefits current retired workers and their families, along with surviving spouses and children of workers who have died. Roughly 15 cents goes to the Disability Insurance (DI) Trust Fund dedicated for people with disabilities and their families.

The trust funds are also used by the Social Security Administration to pay the costs of managing its programs. The government agency says these costs equate to less than one cent of every Social Security tax dollar paid.

How is Social Security calculated?

While Social Security is the major source of income for most people over 65, it's not meant to be the only source of income. How much money in Social Security that a retired worker receives depends on their earnings and when they choose to start receiving benefits.

For those starting benefits at a full retirement age in 2023, these benefits could have been as much as 78% of pre-retirement income for low earners, about 42% for medium earners and about 28% for maximum earners, according to the Social Security Administration. The percentages are higher for those who start benefits after they reach full retirement age and lower for those who start benefits before they reach full retirement age.

How much are Social Security payments?

The average monthly Social Security payment for all beneficiaries in September 2024 was $1,784.44. The average retirement benefit was $1,837.79.

The Social Security Administration announced in October that there will be a 2.5% cost-of-living adjustment (COLA) for benefits starting next year. The increase will see monthly retirement benefits increase about $50 per month on average.

At what age can you get Social Security?

While workers become eligible for Social Security retirement benefits at age 62, full benefits aren't available until full retirement age. The full retirement age ranges depending on a person's year of birth. For anyone born in 1960 or later, the full retirement age is 67.

Check out a full breakdown below:

Is Social Security running out?

If Congress doesn't act to maintain the solvency of the Social Security, the trust funds could become depleted in about a decade. That's because Social Security is paying out more money than it's bringing in. The two trust funds saw a combined deficit of $41.4 billion in 2023.

The trust fund used for retirement benefits currently has a projected depletion date of 2033. The trust funds for retirement benefits and disability benefits have a combined projected depletion date of 2035.

But even if those trust funds aren't replenished, it won't mark the end of Social Security. The Social Security Administration still expects to be able to pay out 79% percent of retirement benefits after 2033 and 83% of benefits overall after 2035.

news Oct 22

What could happen to Social Security benefits in 2033 if the program's trust fund isn't fixed

news Oct 19

Social Security's retirement trust fund may run out in nine years. Here's how the next U.S. president may address that