What Social Security Benefits Actually Are

Social Security benefits are monthly payments the federal government sends to people who have worked and paid Social Security taxes, or to their family members. The program has three main types of benefits: retirement payments for workers age 62 and older, disability payments for workers who cannot work due to a medical condition, and survivor payments for the family members of workers who have died.

You earn the right to these payments by working jobs where your employer and you both paid Social Security tax — the 6.2% that comes out of your paycheck. The government tracks these payments under your Social Security number and uses them to calculate how much you will receive each month. The amount depends on how much you earned over your lifetime and when you choose to start receiving payments.

Social Security is not a savings account where your own money sits waiting for you. It is a federal insurance program funded by current workers' taxes, and those taxes pay benefits to current retirees, disabled workers, and survivors. When you work, you are paying for people receiving benefits right now, and future workers will pay for yours.

Key Takeaways

  • Social Security has three types of benefits: retirement for workers 62 and older, disability for workers who cannot work, and survivor benefits for family members of deceased workers.
  • You earn Social Security credits by working jobs where you and your employer pay Social Security tax, and you need a certain number of credits to receive any benefit.
  • Your monthly payment amount is based on your lifetime earnings record and the age at which you choose to start receiving payments.
  • You can check your earnings record and see an estimate of your future benefits by creating an account on the Social Security Administration website.

How You Earn the Right to Benefits

The Social Security Administration tracks your work history in credits. You earn one credit for each $1,640 of wages you earn in a year (this dollar amount changes yearly). You can earn a maximum of four credits per year, regardless of how much you earn above that threshold.

To receive retirement benefits, you need 40 credits total — which usually means working for about 10 years. For disability and survivor benefits, you need fewer credits, and the exact number depends on your age when you become disabled or when you die. The Social Security Administration keeps a record of every credit you have earned under your Social Security number.

If you worked for a government employer and did not pay Social Security tax, those years do not count toward your credits. The same is true for years you did not work at all. Only wages from jobs where Social Security tax was withheld count toward your work history.

Retirement Benefits and When You Can Start

Retirement benefits are monthly payments you can start receiving at age 62 or later. However, the amount you receive changes based on when you start. If you start at 62, your monthly payment will be smaller than if you wait until age 67 or 70. The Social Security Administration calls your "full retirement age" the age at which you receive your full benefit amount — this age is 66 or 67 depending on what year you were born.

The longer you wait to start benefits, the larger your monthly payment becomes. If you wait until age 70, your payment will be roughly 24% higher than if you started at your full retirement age. This is called a delayed retirement credit. You can work while receiving retirement benefits, but if you are under full retirement age and earn above a certain amount, your benefits will be reduced temporarily.

Your benefit amount is calculated using your 35 highest-earning years. If you worked fewer than 35 years, zeros are counted for the missing years, which lowers your average. This is why people who took time out of the workforce — for caregiving, illness, or other reasons — may receive a lower benefit amount.

Disability and Survivor Benefits

Social Security Disability Insurance (SSDI) provides monthly payments to workers under full retirement age who have a medical condition that prevents them from working. The condition must be expected to last at least 12 months or result in death. You do not have to be completely unable to work — the program looks at whether you can do any substantial work, not just your former job.

Family members of a disabled worker can also receive benefits based on that worker's earnings record. A spouse age 62 or older, a spouse of any age caring for a child under 16, and unmarried children under 19 (or up to 22 if in school full-time) may be may have access to to payments.

Survivor benefits go to family members of a worker who has died. A widow or widower age 60 or older, a widow or widower of any age caring for a child under 16, unmarried children under 19 (or up to 22 if in school), and dependent parents age 62 or older may receive monthly payments based on the deceased worker's earnings record.

How Much You Will Receive Each Month

Your monthly benefit amount is based on your lifetime earnings record. The Social Security Administration calculates your Primary Insurance Amount (PIA) using a formula that weights your highest-earning years more heavily. The exact calculation is complex, but the basic idea is that your benefit reflects what you earned over your working life.

You can see an estimate of your future benefit by creating a "my Social Security" account on the Social Security Administration website. This account shows your earnings record, the credits you have earned, and a projection of what you might receive at different ages. The estimate updates each year after you file your taxes.

If you are receiving benefits and continue to work, your earnings may affect your payment temporarily. If you are under full retirement age and earn above a certain amount (this amount changes yearly), your benefits are reduced by $1 for every $2 you earn above the limit. Once you reach full retirement age, there is no earnings limit.

How to Check Your Earnings Record

The Social Security Administration maintains a record of every year you worked and how much you earned. You should check this record periodically to make sure it is accurate, because errors can lower your benefit amount. You can view your complete earnings record by logging into your "my Social Security" account on the Social Security Administration website.

If you find an error — a year where you worked but no earnings are recorded, or earnings that are lower than you remember — you can contact the Social Security Administration to correct it. You will need documents like W-2 forms or tax returns to prove your earnings. The sooner you report an error, the sooner it can be fixed.

If you do not have a "my Social Security" account yet, you can create one using your email address and Social Security number. The account is free and takes a few minutes to set up. Once you have access, you can check your earnings record, see your benefit estimate, and manage other Social Security information anytime.

What Happens When You Start Receiving Benefits

Once you start receiving benefits, the Social Security Administration deposits your payment directly into your bank account each month. You choose the day of the month you want to receive your payment — usually between the 1st and the 31st. If you do not have a bank account, you can receive your payment on a debit card issued by the Social Security Administration.

Your benefit amount stays the same each month, except for cost-of-living adjustments (COLA). Once a year, usually in October, the Social Security Administration announces whether benefits will increase to account for inflation. This adjustment is automatic — you do not have to do anything to receive it.

If your life circumstances change — you return to work, you get married, you move, or a family member dies — you should report the change to the Social Security Administration. Some changes affect your benefit amount or whether you continue to receive benefits. You can report changes through your "my Social Security" account or by calling the Social Security Administration.

Frequently Asked Questions

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

If you worked in another country and paid Social Security taxes there, you may be able to combine your work history from both countries to reach the 40 credits needed for retirement benefits. This depends on whether the United States has a Social Security agreement with that country. Contact the Social Security Administration to learn whether your foreign work history counts.

What is the difference between Social Security and Supplemental Security Income?

Social Security is based on your work history and the taxes you paid. Supplemental Security Income (SSI) is a needs-based program for people with low income and limited resources, regardless of work history. SSI is funded by general tax revenue, not Social Security taxes. You may receive both programs, but they are separate.

Can I receive benefits if I am still working?

Yes, you can work and receive Social Security benefits at the same time. However, if you are under full retirement age and earn above a certain amount, your benefits will be reduced temporarily. Once you reach full retirement age, you can earn any amount without losing benefits. The earnings limit changes yearly.

How do I report a change in my circumstances?

You can report changes like returning to work, getting married, moving, or a family member's death through your "my Social Security" account online, by phone at 1-800-772-1213, or by visiting your local Social Security office in person. Some changes must be reported within 30 days to avoid overpayment.

What if I think there is an error in my earnings record?

Log into your "my Social Security" account and review your complete earnings record. If you find an error, contact the Social Security Administration with documents like W-2 forms or tax returns to prove your earnings. Errors can be corrected, but it is best to report them as soon as you discover them.