Social Security began in 1935 as a federal insurance program

The Social Security Act was signed into law by President Franklin D. Roosevelt on August 14, 1935, during the Great Depression. The program started paying benefits in January 1937. It was created as a response to widespread poverty among older Americans and was designed to provide a safety net for workers who could no longer earn income due to age, disability, or death.

The original program was much smaller than it is today. In 1937, the first monthly benefit check went to Ida May Fuller, a retired legal secretary from Vermont, for $22.54. Early Social Security only covered workers in commerce and industry — it excluded farm workers, domestic workers, and the self-employed. These groups were added over time through amendments to the law.

The program was funded from the start through a payroll tax split between workers and employers. Workers paid 1 percent of their wages, and employers matched that amount. This tax structure remains the foundation of Social Security today, though the rate has changed multiple times since 1935.

Key Takeaways

  • Social Security was created by the Social Security Act, signed into law on August 14, 1935, and began paying benefits in January 1937.
  • The program started as a response to poverty among older Americans during the Great Depression and was designed to provide income for retirees, disabled workers, and survivors of deceased workers.
  • The original program excluded farm workers, domestic workers, and the self-employed, but these groups were gradually added through amendments over the following decades.
  • Social Security has been funded since its creation through payroll taxes paid by workers and employers, though the tax rate has increased several times since 1935.

Why the program was created during the 1930s

Before Social Security existed, there was no federal safety net for older Americans. Many elderly people lived in poverty, and families often could not afford to support aging relatives. The stock market crash of 1929 and the subsequent Great Depression made the situation worse — millions of workers lost their jobs and savings, leaving older adults with almost no resources.

President Roosevelt's administration saw Social Security as one part of a larger set of programs called the New Deal, which aimed to provide relief, recovery, and reform during the economic crisis. Social Security was meant to address the long-term problem of old-age poverty, while other programs like unemployment insurance and public works jobs addressed when ready needs.

The law also included provisions for survivors' benefits — payments to the families of workers who died — and later expanded to cover workers with disabilities. This made it more than just a retirement program; it became a form of insurance that protected workers and their families against multiple types of income loss.

How the program has changed since 1935

Social Security has been amended many times since its creation. In 1939, just two years after the first benefits were paid, Congress added survivor benefits and benefits for spouses and children of retired workers. This expanded the program beyond individual retirees to protect entire families.

In 1956, the program was expanded again to cover workers with disabilities, not just retirees. This addition created what is now called Social Security Disability Insurance (SSDI). The same year, women became able to claim benefits at age 62 instead of waiting until 65, though with a reduced payment amount.

The payroll tax rate has increased several times. When the program started in 1935, the combined worker and employer tax was 2 percent of wages. By 1990, it had risen to 15.3 percent (split between worker and employer). The maximum income subject to the tax has also increased many times to keep pace with wage growth.

In 1983, a major amendment changed how the program was funded and adjusted the full retirement age. These changes were made to address concerns that the program would not have enough money to pay all future benefits. The full retirement age, which was 65 in 1935, now ranges from 66 to 67 depending on when you were born.

The original scope versus today's program

The 1935 Social Security Act was narrower in scope than the program today. It originally covered only about 60 percent of the workforce. Farm workers, domestic workers, government employees, and the self-employed were excluded. Over the next few decades, these groups were gradually brought into the system through amendments.

The benefit amounts have also changed dramatically. The first beneficiary, Ida May Fuller, received a total of $22,888.92 in benefits over her lifetime — a modest sum even for that era. Today, the average monthly benefit for a retired worker is much higher in dollar terms, though the purchasing power varies depending on inflation and other economic factors.

The program's purpose has also broadened. While it started as old-age insurance, it now provides retirement benefits, survivor benefits, and disability benefits. Medicare, the federal health insurance program for people 65 and older, was added in 1965 as a companion program to Social Security, though it is administered separately.

What Social Security looked like in its first year

When Social Security began paying benefits in January 1937, the process was very different from today. There were no Social Security numbers yet — the first numbers were issued in November 1936 as part of the program's setup. Workers received a card with their number, which became the foundation for tracking earnings and benefits.

The first year of the program was small in scale. Only about 60,000 people received benefits in 1937. The average monthly benefit was around $22, which was a meaningful income for retirees at that time but far less than what workers expected from the program today. The program grew steadily as more workers became covered and reached retirement age.

The administrative structure was also simpler. Social Security was managed by a new federal agency, and local Social Security offices were established to handle claims and payments. This decentralized approach allowed the program to reach workers across the country, though the process of filing for benefits was more manual and time-consuming than it is now.

How the program's funding has evolved

The original payroll tax in 1935 was 1 percent on both workers and employers, applied to the first $3,000 of annual wages. This meant the maximum tax a worker could pay in a year was $30. The wage base — the amount of income subject to the tax — has increased many times to reflect wage growth in the economy.

By the 1980s, concerns arose that Social Security would not have enough money to pay all promised benefits. The 1983 amendments increased the payroll tax rate and gradually raised the full retirement age. These changes were designed to build up a reserve of funds to cover future benefit payments. The combined payroll tax rate for workers and employers is now 15.3 percent.

The program operates on a pay-as-you-go basis, meaning that payroll taxes collected from current workers are used to pay benefits to current retirees and beneficiaries. This structure has remained the same since 1935, though the ratio of workers to beneficiaries has changed significantly as the population has aged.

Frequently Asked Questions

Who was the first person to receive a Social Security benefit?

Ida May Fuller, a retired legal secretary from Ludlow, Vermont, received the first monthly Social Security benefit check on January 31, 1937. She received $22.54. Fuller lived to be 100 years old and collected a total of $22,888.92 in benefits over her lifetime.

Did Social Security cover all workers when it started?

No. The original 1935 law excluded farm workers, domestic workers, government employees, and the self-employed. These groups made up about 40 percent of the workforce at that time. They were gradually added to the program through amendments over the following decades, with most groups covered by the 1950s.

Why was the full retirement age changed from 65?

The full retirement age was increased gradually starting in 2003 because people are living longer than they were in 1935. When Social Security began, the average life expectancy was much lower. Raising the retirement age helps may support the program has enough money to pay all future benefits. The change was made in the 1983 amendments.

Has the payroll tax rate stayed the same since 1935?

No. The payroll tax has increased multiple times. It started at 1 percent in 1935 and rose to 15.3 percent (combined worker and employer) by 1990. The maximum income subject to the tax has also increased many times to keep pace with wage growth in the economy.

When did disability benefits become part of Social Security?

Disability benefits were added to Social Security in 1956, creating what is now called Social Security Disability Insurance (SSDI). This expansion allowed workers who became unable to work due to a medical condition to receive benefits before reaching retirement age, not just retirees and their families.