What Social Security is and who it covers

Social Security is a federal insurance program run by the Social Security Administration (SSA). It pays monthly benefits to workers who have reached retirement age, to workers who become disabled before retirement, to surviving family members of workers who have died, and to some family members of beneficiaries already receiving benefits.

The program is funded through payroll taxes. When you work, you and your employer each pay 6.2% of your wages into Social Security (self-employed workers pay 12.4%). You earn credits toward benefits as you work — you need 40 credits to be fully insured for retirement benefits, which typically takes about 10 years of work. Younger workers need fewer credits to be insured for disability or survivor benefits.

Social Security is not means-tested, meaning your income or assets do not disqualify you from receiving benefits once you have earned enough credits. However, if you claim benefits before your full retirement age and continue working, your benefits may be reduced based on your earnings.

Key Takeaways

  • You earn Social Security credits through payroll taxes, and you need 40 credits (roughly 10 years of work) to receive retirement benefits.
  • Your monthly benefit amount is based on your highest 35 years of earnings, so claiming later increases your benefit because more recent earnings are included in the calculation.
  • You can claim retirement benefits as early as age 62, but your monthly payment will be permanently lower than if you wait until your full retirement age or later.
  • Social Security also pays benefits to disabled workers, surviving spouses and children of deceased workers, and family members of current beneficiaries in certain situations.
  • You must create an account on ssa.gov to view your earnings record, request a replacement Social Security card, or manage your benefits online.

Retirement benefits and when you can claim

You can claim Social Security retirement benefits as early as age 62, but the amount you receive each month depends on when you claim. Your full retirement age — the age at which you receive your full benefit amount — is between 66 and 67, depending on your birth year. If you claim before your full retirement age, your monthly benefit is permanently reduced. If you delay claiming past your full retirement age, your benefit increases by about 8% per year until age 70.

Your benefit is calculated using your highest 35 years of earnings. If you worked fewer than 35 years, zeros are included in the calculation, which lowers your benefit. The SSA uses your earnings record to compute your Primary Insurance Amount (PIA), which is the basis for all benefit calculations for you and your family members.

If you are still working when you claim benefits before your full retirement age, Social Security reduces your benefits based on your earnings. For 2024, benefits are reduced by $1 for every $2 you earn above $23,400 (the limit changes each year). Once you reach your full retirement age, there is no earnings limit.

Disability and survivor benefits

If you become unable to work due to a medical condition expected to last at least 12 months or result in death, you may be insured for Social Security Disability Insurance (SSDI). You do not have to be retirement age to receive SSDI — you need only have earned enough credits, and the number required depends on your age when you become disabled. Younger workers need fewer credits than older workers.

When a worker receiving SSDI reaches full retirement age, their disability benefit converts to a retirement benefit at the same amount. Family members — including a spouse age 62 or older, a spouse of any age caring for the worker's child under 16, and unmarried children under 19 (or 22 if in high school full-time) — may also receive benefits based on the disabled worker's earnings record.

Survivor benefits are paid to family members of a worker who has died. A widow or widower can claim as early as age 60 (or age 50 if disabled). Unmarried children under 19 (or 22 if in high school full-time) are insured, as are dependent parents age 62 or older. A surviving spouse caring for the worker's child under 16 can claim at any age.

How your benefit amount is determined

Social Security calculates your benefit using a formula applied to your Average Indexed Monthly Earnings (AIME). The SSA takes your highest 35 years of earnings, adjusts them for wage growth in the economy, and divides by 420 months to get your AIME. This amount is then run through a bend-point formula that replaces a higher percentage of lower earnings and a lower percentage of higher earnings.

The bend points and percentages change each year. For 2024, the formula replaces 90% of the first $1,174 of AIME, 32% of AIME between $1,174 and $7,078, and 15% of AIME above $7,078. These dollar amounts adjust annually based on national wage growth.

If you have a gap in your work history — years when you earned little or nothing — those years count as zeros in your 35-year average. You can request a statement of your earnings record from the SSA to verify the years included in your calculation. If you find an error, you can request a correction.

Taxes on Social Security benefits

Depending on your total income, a portion of your Social Security benefits may be subject to federal income tax. The SSA uses a formula based on your combined income, which is your adjusted gross income plus non-taxable interest plus half your Social Security benefits.

If your combined income is below $25,000 (single) or $32,000 (married filing jointly), your benefits are not taxed. If your combined income is above these thresholds, up to 50% of your benefits may be taxable, and if it exceeds higher thresholds ($34,000 for single filers and $44,000 for married filers), up to 85% of your benefits may be taxable.

Some states also tax Social Security benefits, though most do not. You can check your state's tax rules through your state revenue department. The SSA sends Form SSA-1099 each January showing the benefits you received in the previous year, which you use when filing your tax return.

How to manage your Social Security account

You can create a my Social Security account at ssa.gov to view your earnings record, check your estimated benefits, request a replacement Social Security card, change your address, and manage direct deposit. You will need to verify your identity using information from your credit report or by uploading documents.

If you do not have internet access or prefer to work with someone in person, you can visit a local Social Security office. You can find the office nearest you on ssa.gov or call 1-800-772-1213. Wait times at offices vary, and you may be able to schedule an appointment online or by phone to reduce your wait.

You can also request a replacement Social Security card by mail if you have a my Social Security account. Some states allow you to request a card through the state's motor vehicle department. If you need to report a lost or stolen card, contact the SSA when ready.

How claiming age affects your lifetime benefits

The age you choose to claim Social Security has a large effect on how much you receive over your lifetime. If you claim at 62, your monthly benefit is about 30% lower than if you claim at your full retirement age. If you delay until 70, your monthly benefit is about 76% higher than at your full retirement age.

Whether it makes sense to claim early or late depends on factors including your health, family history of longevity, current income needs, and whether you have other sources of retirement income. Someone in poor health may receive more total benefits by claiming early, while someone in good health may receive more by waiting. The SSA's website includes a benefit calculator that shows estimates for different claiming ages.

If you claim before your full retirement age and later regret the decision, you have limited options. You can withdraw your process within 12 months of claiming and repay all benefits received, which restarts your claim as if you had never filed. After 12 months, you cannot withdraw your process, but you can suspend your benefits at your full retirement age and let them grow until age 70.

Frequently Asked Questions

What is the difference between Social Security and SSI?

Social Security (OASDI) is an insurance program funded by payroll taxes and based on your work history. Supplemental Security Income (SSI) is a needs-based program for people age 65 or older, blind, or disabled with limited income and resources. SSI is funded by general tax revenue, not payroll taxes, and has no work requirement.

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

You must have earned 40 credits (roughly 10 years of work) under the U.S. Social Security system to receive retirement benefits. If you worked in another country, you may be insured under that country's system. Some countries have agreements with the U.S. that allow credits from both countries to be combined, but this varies by country.

What happens to my benefits if I continue working after I claim?

If you claim before your full retirement age and earn more than the annual limit ($23,400 in 2024), your benefits are reduced by $1 for every $2 you earn above the limit. Once you reach your full retirement age, there is no earnings limit and your benefits are not reduced, even if you continue working.

How do I report a change in my circumstances to Social Security?

You can report changes such as a change of address, name change, or change in direct deposit information through your my Social Security account online. You can also call 1-800-772-1213 or visit a local Social Security office. If you are receiving benefits and your work status or income changes, report it promptly to avoid overpayment.

Can I receive Social Security benefits while living outside the United States?

U.S. citizens can receive Social Security benefits while living abroad in most countries. However, benefits are not payable to beneficiaries living in certain countries, including Cuba, North Korea, Iran, Syria, and a few others. If you plan to live abroad, contact the SSA before you move to confirm your benefits will continue.