Social Security began in 1935 as a federal insurance program

Social Security started on August 14, 1935, when President Franklin D. Roosevelt signed the Social Security Act into law. The program was created during the Great Depression as a way to provide income to older workers, people with disabilities, and surviving family members of workers who had died. The first monthly benefit was paid in January 1940.

The program worked differently then than it does now. When it launched, benefits were much smaller, fewer people were covered, and the rules about who could receive them were stricter. Over the decades, Congress has changed the program many times — expanding who is covered, raising the amount of benefits, and adjusting the age at which people can start collecting.

Key Takeaways

  • Social Security was signed into law on August 14, 1935, and the first monthly benefit was paid in January 1940.
  • The program was created to provide income to retired workers, people with disabilities, and the surviving family members of deceased workers.
  • Social Security originally covered only certain types of workers and excluded many occupations, including farm workers and domestic workers.
  • The program has been expanded many times since 1935, including adding disability benefits in 1956 and survivor benefits for families.

Why Social Security was created during the Great Depression

Before Social Security, there was no federal safety net for older people or people who could not work. Many elderly Americans lived in poverty. Families were expected to care for aging relatives, but the economic collapse of the 1930s made this impossible for millions of people. Savings were wiped out, jobs disappeared, and families could not afford to support multiple generations.

Roosevelt's administration designed Social Security as a form of insurance, not charity. Workers and employers both paid into a fund, and workers received benefits based on what they had paid in. This framing made the program politically acceptable at a time when many Americans viewed direct government aid as shameful. The idea was that people were getting back what they had contributed, not receiving a handout.

Who was covered when the program started

Social Security did not cover everyone when it began. The original law excluded farm workers, domestic workers, government employees, and the self-employed. These exclusions meant that many Black workers in the South, who worked as sharecroppers and domestic workers, were left out of the program. Women who had never worked outside the home also received no direct benefits, though they could later receive benefits as the spouse or widow of a covered worker.

Over time, Congress expanded the program to include more workers. By 1950, farm workers and domestic workers were added. Government employees were gradually included. By the 1980s, nearly all workers were covered by Social Security, with only a few exceptions like some state and local government employees who had their own pension systems.

How benefits have changed since 1935

The original Social Security program only paid retirement benefits to workers age 65 and older. In 1956, Congress added disability benefits so that workers who became disabled before retirement age could receive payments. In the same year, widows and widowers became able to collect benefits at age 50 if they were caring for a child under 16. Survivor benefits for children and spouses were also expanded over the years.

The amount of benefits has grown significantly. In 1940, the average monthly benefit was about $22. Today, the average is much higher, though the exact amount depends on your work history and when you start collecting. Congress has also changed the full retirement age — the age at which you can receive your full benefit amount without any reduction. For people born in 1943 or later, the full retirement age is 67, compared to 65 for people born before 1938.

How the program is funded

Social Security is funded through a payroll tax that workers and employers both pay. When you work, you see this tax on your pay stub as "FICA" or "Social Security tax." Your employer pays an equal amount. Self-employed people pay both the worker and employer portions. This money goes into a trust fund that pays current benefits to retirees, disabled workers, and survivors.

The payroll tax rate has changed over time. When the program started, the tax was 1 percent on earnings up to $3,000 per year. Today, the tax is 12.4 percent on earnings up to a certain limit, which changes each year. Half of this tax (6.2 percent) comes from workers, and half comes from employers.

Major changes to Social Security over the decades

In 1972, Congress passed a law that increased all Social Security benefits by 20 percent and created automatic cost-of-living adjustments, or COLAs. This meant that benefits would automatically increase each year to keep up with inflation. Before this, Congress had to pass a new law each time benefits needed to be raised.

In 1983, a major reform changed how Social Security was taxed and adjusted the full retirement age. This reform was passed because the program was running out of money and needed changes to stay solvent. The 1983 amendments gradually raised the full retirement age from 65 to 67 and made a portion of Social Security benefits subject to income tax for higher-income retirees.

How Social Security works today

Today, Social Security provides monthly income to three groups of people: workers age 62 and older, workers with disabilities, and family members of workers who have died. To receive benefits, you must have worked and paid Social Security taxes for a certain number of years — usually at least 10 years, or 40 work credits. The amount you receive is based on your highest 35 years of earnings.

You can start collecting retirement benefits as early as age 62, but your monthly payment will be smaller than if you wait until your full retirement age or even until age 70. Many people wait to start benefits because the longer you wait, the larger your monthly payment will be. Social Security also pays benefits to your spouse, ex-spouse, children, and surviving family members under certain conditions.

Frequently Asked Questions

Was Social Security the first government retirement program in the world?

No. Germany created the first government retirement program in 1889 under Chancellor Otto von Bismarck. However, Social Security was the first major federal retirement program in the United States, and it became a model for similar programs in other countries.

Why did it take until 1940 for the first benefits to be paid?

The program needed time to set up the administrative systems to track workers, collect taxes, and process applications. The law was signed in August 1935, and the Social Security Administration spent several years building the infrastructure needed to run the program before payments could begin in January 1940.

Has Social Security always paid disability benefits?

No. Disability benefits were added in 1956, more than 20 years after the program started. Originally, Social Security only paid retirement benefits to workers age 65 and older. The addition of disability benefits made it a more complete social insurance program.

Can Social Security run out of money?

The Social Security trust fund has reserves that can pay benefits for a limited time if income falls short of expenses. Trustees project when these reserves may be depleted based on demographic and economic trends, but Congress can change the program's funding or benefits at any time to address this.

Why were farm and domestic workers excluded from Social Security at first?

These exclusions were partly due to the difficulty of tracking earnings for workers who were often paid in cash and partly due to political opposition from Southern lawmakers who wanted to exclude workers in those occupations. Over time, these exclusions were removed as the program expanded.