What Social Security actually is

Social Security is a federal insurance program that pays monthly cash to people who are retired, disabled, or whose family member who worked has died. You pay into it through payroll taxes during your working years, and the program pays you back later based on how much you earned and how long you worked.

The program started in 1935 and is run by the Social Security Administration (SSA), a federal agency. It is not a savings account in your name — it is insurance. The taxes you pay today go to people receiving benefits today, and when you retire or become unable to work, current workers' taxes pay your benefit.

Social Security is separate from Medicare (health insurance for people 65 and older) and Medicaid (health coverage for low-income people). It is also separate from Supplemental Security Income (SSI), which is a different program for people with low income and limited resources.

Key Takeaways

  • Social Security pays monthly benefits to retired workers, disabled workers, and family members of workers who have died, based on your earnings history.
  • You earn Social Security credits by working and paying payroll taxes; most people need 40 credits (roughly 10 years of work) to receive retirement benefits.
  • Your monthly benefit amount depends on how much you earned during your working years and what age you start receiving benefits.
  • You can view your earnings record and estimated benefit amount on your personal Social Security account at ssa.gov.
  • The earliest you can receive retirement benefits is age 62, but waiting until age 70 results in a larger monthly payment.

The three main types of Social Security benefits

Retirement benefits go to workers who have reached a certain age and have worked long enough to earn credits in the system. You can start receiving them as early as age 62, but your monthly payment will be smaller than if you wait. If you wait until your full retirement age (which ranges from 66 to 67 depending on your birth year), you receive your full benefit amount. If you wait until age 70, your monthly payment is even larger.

Disability benefits go to workers under full retirement age who cannot work because of a medical condition expected to last at least 12 months or result in death. You do not have to be retired to receive these benefits — you just have to be unable to work and have earned enough credits. Family members of a disabled worker can also receive benefits based on that worker's earnings record.

Survivor benefits go to family members when a worker dies. 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, but each family member's share is calculated separately.

How you earn Social Security credits

You earn Social Security credits by working and paying payroll taxes. In 2024, you earn one credit for each $1,730 of wages you earn, up to a maximum of four credits per year. The dollar amount that earns a credit changes each year. Most people need 40 credits total to receive retirement benefits — that is roughly 10 years of full-time work, though the credits do not have to be consecutive.

If you become disabled, you may need fewer credits depending on your age. Younger workers need fewer credits than older workers. You can check how many credits you have earned by creating an account on ssa.gov and viewing your Social Security Statement, which also shows your earnings history.

Self-employed people pay both the employee and employer portion of Social Security tax (15.3% total), while employees and employers each pay 6.2% for Social Security. If you work for someone else, your employer withholds your share from your paycheck.

How your benefit amount is calculated

Your monthly Social Security benefit is based on your highest 35 years of earnings. The SSA adjusts your past earnings to account for wage growth over time, then calculates an average monthly amount. This becomes your Primary Insurance Amount (PIA), which is your full retirement benefit if you claim at your full retirement age.

If you claim before your full retirement age, your benefit is reduced. For each month you claim before full retirement age, your payment is smaller — the reduction is about 0.55% per month. If you claim at age 62 (the earliest possible), your benefit is roughly 30% lower than your full retirement amount, depending on your birth year.

If you delay claiming past your full retirement age, your benefit increases. For each month you wait past full retirement age, your payment grows by about 0.8% per month, up to age 70. If you wait until 70, your benefit is roughly 24% to 32% higher than your full retirement amount, depending on your birth year.

When and how to start receiving benefits

You can create a personal account at ssa.gov to view your earnings record, see your estimated benefit amount, and start the process of receiving benefits. You can also call the SSA at 1-800-772-1213 or visit a local Social Security office in person.

The SSA recommends creating your account at least four months before you want benefits to start, though you can do it sooner. When you start the process, you will need to provide personal information, work history, and banking details so the SSA can deposit your benefit directly into your account each month.

Benefits are paid monthly, usually on the second, third, or fourth Wednesday of each month depending on your birth date. The SSA deposits the money directly into your bank account, savings account, or prepaid debit card — they do not mail checks unless you specifically request it.

What happens to your benefits if you keep working

If you claim Social Security before your full retirement age and continue to work, your benefit may be temporarily reduced if your earnings exceed a certain limit. In 2024, if you are under full retirement age for the entire year, the SSA reduces your benefit 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 limit on how much you can earn without affecting your benefit. Your benefit also increases slightly if you continue to work after claiming, because the SSA recalculates your benefit each year to include your new earnings if they are higher than one of your previous 35 years.

Understanding your Social Security Statement

Your Social Security Statement shows your complete earnings history year by year, the number of credits you have earned, and an estimate of what your retirement, disability, and survivor benefits would be. You can view it anytime by logging into your account at ssa.gov.

Check your statement for errors, especially if you changed your name or if you worked under a different name at some point. If you see a mistake, you can report it through your online account or by calling the SSA. Correcting errors now prevents problems later when you claim benefits.

Your statement also shows what your family members might receive if you become disabled or die. This helps you understand the full value of your Social Security coverage, not just your own retirement benefit.

Frequently Asked Questions

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

You must have earned at least 40 credits (roughly 10 years of work) in jobs covered by Social Security to receive retirement benefits. Work done for a foreign government or in certain other situations may not count. If you worked in another country, some international agreements may allow that work to count toward your benefit. Contact the SSA to discuss your specific situation.

What is the difference between Social Security and SSI?

Social Security is based on your work history and payroll taxes you paid. Supplemental Security Income (SSI) is a needs-based program for people with low income and limited resources who are disabled, blind, or age 65 or older. SSI does not require a work history. You may receive both, but they are separate programs with different rules.

Can I change my mind after I start receiving benefits?

You can withdraw your claim within 12 months of starting benefits, but you must repay all the money you received. After 12 months, you cannot withdraw your claim. You can suspend your benefits after reaching full retirement age to allow them to grow, but this is different from withdrawing your claim.

How do taxes affect my Social Security benefit?

Depending on your total income, up to 85% of your Social Security benefit may be subject to federal income tax. State taxes vary — some states do not tax Social Security at all, while others tax it. The SSA can withhold federal taxes from your benefit if you request it, or you can pay estimated taxes quarterly.

What happens to my benefits if I move out of the United States?

You can receive Social Security benefits while living in most countries, but not all. Some countries have restrictions. If you plan to move abroad, contact the SSA before you leave to understand how it affects your benefits and what documentation you may need to provide.