What Is Social Security?

Social Security Explained

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Social Security is a federal program that issues benefits to retirees who paid into the program during their working years, people unable to work due to a physical or mental condition, spouses and children of beneficiaries, and surviving family members of beneficiaries. Social Security benefits are administered by the Social Security Administration.

Learn more about what Social Security is, how it works, the different types of Social Security benefits, and who can receive benefits.

Definition and Example of Social Security

Social Security is a federal benefits program that pays benefits to retirees and workers who are disabled, as well as their family members and survivors.

  • Alternate name: Old-Age, Survivors, and Disability Insurance Program
  • Acronym: OASDI

For example, workers who have paid into Social Security for at least 10 years are generally eligible to receive Social Security retirement benefits when they turn 62 years old.

How Social Security Works

Social Security is financed through a 12.4% tax paid by employers, employees, and self-employed individuals. This tax money is deposited into the two Social Security trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund.

The Social Security Administration pays current benefits and administrative costs out of these trust funds. Unused money is left in the trust funds and invested in Treasury bonds.

Types of Social Security Benefits

Although Social Security is perhaps best-known as a retirement program for older Americans, it pays benefits to individuals outside that demographic, as well.

Social Security Retirement Benefits

As a worker earns income during their working years, they earn up to four Social Security credits per year. Forty credits are typically required to receive retirement benefits. So, in general, if someone has worked and paid into Social Security for at least 10 years, they will be eligible for Social Security retirement benefits.

The amount of retirement benefits a retiree receives depends on their inflation-adjusted lifetime earnings as well as how old they are when they choose to begin receiving benefits.

Although individuals may be able to begin receiving Social Security retirement benefits at age 62, they will receive lower payments than if they wait until their full retirement age. A worker’s full retirement age depends on when they were born.

Year of Birth Full Retirement Age
1943-1954 66 
1955 66 and 2 months old
1956 66 and 4 months old
1957 66 and 6 months old
1958 66 and 8 months old
1959 66 and 10 months old
1960 or later 67

On the other hand, if a worker chooses to delay receiving retirement benefits until after they reach full retirement age, their future retirement benefits will increase with each month of delay until they turn 70 years old.

You can estimate your future Social Security benefits on the Social Security Administration’s website.

Social Security Disability Benefits

Social Security also issues benefits to workers of all ages who can no longer work due to a chronic or fatal condition, either mental or physical.

Similar to retirement benefits, Social Security has employment requirements for disability benefits, as well. These include the individual’s age at the time they became disabled, how long they worked in the three to 10 years prior to becoming disabled, and how long they worked in total before becoming disabled.

To receive disability benefits, you must have worked for a minimum amount of time in the three to 10 years before becoming disabled, including the quarter in which you became disabled. This is known as the recent work requirement.

Age at Disability Recent Work Requirement
In or before the quarter the individual turned age 24 1.5 years during the three-year period ending with the quarter in which the individual became disabled
In the quarter after the individual turned age 24 but before the quarter in which they turned age 31 At least half of the time period beginning with the quarter after they turned age 21 and ending with the quarter in which the individual became disabled
In the quarter the individual turned age 31 or later At least five years out of the 10-year period ending with the quarter in which the individual became disabled

In addition to the recent work requirement, an individual must have worked a certain number of years in their entire lifetime to be eligible for Social Security disability benefits. This requirement is called the duration of work requirement.

To meet the duration of work requirement, an individual would subtract the year they turned 22 from the year in which they became disabled to derive the number of quarters of work required.

For example, let’s say you were born in 1980 and turned 22 in 2002. If you became disabled in 2020, you would subtract 2002 from 2020 to arrive at 18. In this case, you generally would need to have worked at least 18 quarters (4.5 years) to satisfy the duration-of-work requirement.

Social Security Benefits for Families

When a Social Security beneficiary starts receiving retirement or disability benefits, members of their family may be eligible to receive benefits, as well. Family members can receive up to 50% of the beneficiary’s benefits with total family limits ranging from 150% to 180%.

A relative’s eligibility for benefits depends on their relationship to the beneficiary and possibly other factors, such as their age, disability status, marital status, student status, and childcare responsibilities.

Type of Family Member Minimum Eligibility Requirements
Spouse age 62 or older Eligible
Spouse of any age Eligible if caring for beneficiary’s child who is younger than age 16 or disabled
Child or legal dependent younger than 18  Eligible if unmarried
Child or legal dependent 18 or 19  Eligible if unmarried and a full-time student
Child or legal dependant age 18 or older Eligible if unmarried and has a disability that started before the age of 22
Grandchild Eligible if dependent on the beneficiary and one of the following is true: the child’s biological parents are deceased or disabled or the beneficiary legally adopted the grandchild

Social Security Benefits for Survivors

Upon a Social Security beneficiary’s death, their surviving family may be eligible for benefits. These are called survivors benefits.

Generally, survivors receive 75% to 100% of the beneficiary’s basic Social Security benefit with total family limits ranging from 150% to 180%.

Surviving spouses or minor children may be eligible for a one-time payment of $255 survivor’s benefit upon the death of the beneficiary.

A survivor’s eligibility for benefits depends on their relationship to the deceased beneficiary and possibly other factors such as their age, disability status, marital status, dependency status, student status, benefits status, and childcare responsibilities.

Type of Survivor Minimum Eligibility Requirements
Widow or widower age 60 or older Eligible
Widow or widower age 50 or older Eligible if disabled
Widow or widower of any age Eligible if caring for deceased beneficiary’s child who is younger than age 16 or disabled
Unmarried ex-spouse age 60 or older Eligible if married to you for at least 10 years and not entitled to their own benefits that are greater than or equal to your benefits
Unmarried ex-spouse age 50 or older Eligible if disabled and married to you for at least 10 years and are not entitled to their own benefits that are greater than or equal to your benefits
Unmarried ex-spouse of any age Eligible if they are caring for an eligible child and not entitled to their own benefits that are greater than or equal to your benefits
Married ex-spouse Eligible if remarriage occurred after age 60 (50 if they are disabled) and meet the requirements for unmarried spouses their age
Child younger than 18 years old Eligible if unmarried
Child 18 or 19 years old Eligible if unmarried and a full-time student
Child age 18 or older Eligible if unmarried and has a disability that started before the age of 22
Parent(s) Eligible if they were your dependent(s) for at least half their support

Social Security vs. Supplemental Security Income

Sometimes people confuse Social Security and Supplemental Security Income (SSI). While both programs are administered by the Social Security Administration, they are intended for different groups of people and are financed in different ways.

Social Security, for example, pays out benefits to individuals, their families, and their survivors based on how long that individual worked without respect to need.

SSI, on the other hand, is needs-based and not based on an individual’s work history.

While Social Security is funded by special payroll taxes deposited into the two Social Security trust funds, SSI is funded by general tax revenues.

Criticism of Social Security

A primary criticism of Social Security is that at some point in the future—perhaps as early as the year 2034—the Social Security trust funds will no longer be able to pay full benefits scheduled under current law.

Although the trust funds’ projected shortfalls are typically attributed to lower birth rates and increased life expectancies for workers, some groups criticize the management of the trust funds themselves.

The Social Security Advisory Board, for example, has pointed out that the trust funds are invested solely in Treasury bonds, which have historically underperformed compared to the stock market. The board noted that if the trust funds were invested in stocks, the heightened returns could significantly mitigate their projected funding shortfalls.

Key Takeaways

  • Social Security is a federal program that issues benefits to retirees and disabled workers based on their age and work history as well as to beneficiaries’ family members and survivors if they meet certain eligibility requirements.
  • Social Security is funded by a special 12.4% tax paid by employers, employees, and self-employed individuals paid into the two Social Security trust funds.
  • The Social Security trust funds are projected to be unable to pay full benefits at some point in the future.
  • Social Security is not the same as Supplemental Security Income (SSI), which is a program that issues benefits to individuals based on their need rather than their work history.