What Social Security is and who receives it

Social Security is a federal insurance program that pays monthly cash to workers who have retired, to people with disabilities, and to family members of workers who have died. You earn the right to these payments by working and paying Social Security taxes during your working years. The amount you receive depends on how much you earned and when you start taking payments.

Social Security is not a savings account where your taxes sit waiting for you. It is a pay-as-you-go system: current workers' taxes fund current retirees' checks. You build a record with the Social Security Administration (SSA) that tracks your earnings history, and that record determines what you can receive later.

Most people think of Social Security as retirement income, but the program has three main parts. Retirement benefits go to workers aged 62 and older. Disability benefits (SSDI) go to workers under full retirement age who cannot work due to a medical condition expected to last at least 12 months or result in death. Survivor benefits go to the spouse, ex-spouse, children, and parents of a worker who has died.

Key Takeaways

  • Social Security retirement benefits are available starting at age 62, but the monthly payment is smaller if you start before your full retirement age, which ranges from 66 to 67 depending on your birth year.
  • Your earnings record with Social Security determines your benefit amount, and you can view your record and estimated benefits by creating an account at ssa.gov.
  • Delaying retirement benefits past your full retirement age increases your monthly payment by about 8 percent per year until age 70, which may result in a larger lifetime total if you live longer.
  • Spouses and ex-spouses may receive benefits based on your earnings record even if they did not work, and children under 19 (or 19 if still in high school) may receive survivor benefits if you die.
  • You must contact the Social Security Administration to start receiving benefits; payments do not begin automatically.

How your benefit amount is calculated

The SSA looks at your 35 highest-earning years of work to calculate your benefit. If you worked fewer than 35 years, they count zeros 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 often receive smaller benefits.

Your benefit is also adjusted for inflation each year. The SSA announces a cost-of-living adjustment (COLA) in October, and that percentage increase applies to all benefits starting in January. The COLA varies year to year based on inflation.

You can see your own earnings record and an estimate of your future benefits by creating a my Social Security account at ssa.gov. The estimate assumes you keep working at your current earnings level until you start benefits. If your earnings change, the estimate will change too.

When you can start receiving benefits and how it affects your payment

You can start Social Security retirement benefits as early as age 62, but your monthly payment will be permanently reduced. The reduction is roughly 30 percent if you were born in 1960 or later and start at 62. The longer you wait, the larger your monthly check becomes.

Your full retirement age is the age at which you receive 100 percent of your calculated benefit. For people born between 1943 and 1954, full retirement age is 66. For people born between 1955 and 1960, it ranges from 66 and 2 months to 66 and 10 months. For people born in 1960 or later, full retirement age is 67. You can find your full retirement age on your Social Security statement or at ssa.gov.

If you delay benefits past your full retirement age, your monthly payment increases by about 8 percent per year until age 70. At 70, the increase stops, so there is no financial reason to delay beyond that age. Whether delaying makes sense depends on your health, family history, and how long you expect to live. Someone in excellent health with a family history of longevity may receive more total money by waiting; someone with serious health conditions may receive more by starting earlier.

Working while receiving Social Security

If you start benefits before your full retirement age and continue working, the SSA will reduce your benefit by $1 for every $2 you earn above a yearly limit. For 2024, that limit is $23,400, but it changes each year. In the year you reach full retirement age, the reduction is $1 for every $3 earned above a different limit, and only earnings before the month you reach full retirement age count.

Once you reach your full retirement age, you can earn any amount without any reduction to your benefit. This is one reason some people wait until full retirement age to start benefits if they plan to keep working.

Self-employment income counts as earnings for this rule. If you own a business, the SSA looks at your net profit, not your gross revenue.

Benefits for spouses, ex-spouses, and children

A spouse who is at least 62 years old may receive a benefit based on your earnings record, even if they never worked or have a very small earnings record of their own. The spouse's benefit is typically up to 50 percent of your full retirement age benefit amount. A spouse who is caring for your child under age 16 can receive benefits at any age.

An ex-spouse can also receive benefits on your record if the marriage lasted at least 10 years, you are at least 62 years old, and your ex-spouse is at least 62 and unmarried. The ex-spouse's benefit does not reduce your own benefit or your current spouse's benefit.

Children under age 19 (or 19 if still in high school full-time) may receive benefits based on your earnings record. Disabled adult children may receive benefits at any age if the disability began before age 22. Each family member's benefit is a percentage of your full retirement age amount, and the total paid to all family members combined cannot exceed about 150 to 180 percent of your benefit (the exact percentage varies).

How to start receiving benefits

You must contact the Social Security Administration to begin receiving benefits. You cannot start payments by mail or online; you must either call, visit a local SSA office, or use the online process at ssa.gov. The SSA recommends explore about three months before you want benefits to start, because processing takes time.

When you explore, you will need to provide proof of age (birth certificate), proof of citizenship or legal residency (passport or green card), and proof of earnings (W-2 forms or tax returns). If you are explore for spousal or survivor benefits, you will also need to provide proof of the worker's age and your relationship to them (marriage certificate, divorce decree, or birth certificate).

After you explore, the SSA will contact you if they need more information. Approval typically takes a few weeks to a few months. Your first payment may arrive by direct deposit or check, depending on how you set it up.

Medicare and other programs tied to Social Security

Most people become may be able to access for Medicare at age 65, regardless of whether they have started Social Security. However, if you are receiving Social Security benefits, you are automatically enrolled in Medicare Parts A and B when you turn 65, unless you opt out. You should review your Medicare options before age 65 to understand your choices.

Supplemental Security Income (SSI) is a separate program from Social Security retirement and disability benefits. SSI provides cash to people aged 65 and older, blind people, and disabled people with very low income and few assets. You may receive both Social Security and SSI if your Social Security benefit is very small.

Some states also offer additional state supplements to Social Security for low-income seniors. The amount and rules vary by state. You can ask the SSA or your local Area Agency on Aging whether your state offers a supplement.

Frequently Asked Questions

Can I change my mind after I start Social Security?

If you have been receiving benefits for less than 12 months, you can withdraw your process and repay all benefits received. This resets your record as if you never started. After 12 months, you cannot withdraw, but you can suspend benefits at your full retirement age and let them grow until age 70. Suspended benefits do not earn the 8 percent annual increase; instead, you receive the increase that was already scheduled for your age.

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

If you are a U.S. citizen, you can receive Social Security benefits anywhere in the world. If you are not a U.S. citizen, rules are more complex and depend on your country of residence and immigration status. Contact the SSA before you move to confirm your situation.

How much does Social Security cost, and do I have to pay taxes on it?

Social Security is funded by payroll taxes: you and your employer each pay 6.2 percent of your wages (self-employed people pay 12.4 percent). Part of your Social Security benefit may be taxable as income if your total income exceeds certain thresholds, which vary based on filing status. A tax professional can help you understand your specific situation.

What if I never worked or worked very little?

You need 40 work credits to receive retirement benefits, which typically means 10 years of work. If you have fewer credits, you may not receive your own retirement benefit, but you may still receive spousal or survivor benefits if you are married or widowed. Contact the SSA to review your specific earnings record.

Can I receive Social Security and a pension at the same time?

Yes, but if your pension is from work not covered by Social Security (such as some government jobs), two rules may reduce your Social Security benefit: the Government Pension Offset and the Windfall Elimination Provision. These rules are complex and depend on your specific situation. The SSA can explain how they explore to you.