Fun Facts You Didn’t Know About Social Security

Did you know that most of the people who get Social Security are retirees and their families? Social Security is like a big safety blanket from the government for lots of people. It helps millions of Americans, including seniors who don’t work anymore, people who are disabled and can’t work, and even the families of workers who have retired, are disabled, or have passed away.

Understanding how Social Security works can be tricky because there are lots of different rules and exceptions to remember. Once your finish reading this, you should be able to:

1. Know why Social Security exists and what it’s for.
2. Make a list of all the different benefits people can get from Social Security.
3. Understand what you need to do to qualify for these benefits.
4. Explain how Social Security figures out how much money you’ll get when you retire.
5. See how the age when you start getting benefits can change how much money you’ll get.

The Beginnings of Social Security

The Old Age, Survivors, and Disability Insurance (OASDI) program was created back in 1935, but you probably know it as Social Security. It was brought about to help people who were struggling to make ends meet, especially after the tough times during and after the Great Depression in the 1930s. Its main job was to give workers a safety net, kind of like a financial cushion, for when they stopped working and needed some money to live on.

They made some changes to the first Social Security Act in 1939. They added something called survivor benefits to help out the families of workers who pass away too soon. This was to make sure they still had some money coming in after a loved one passed away. They added disability benefits to help people who couldn’t work because they were sick or hurt in 1956.

These changes made Social Security more than just a program for workers who retire. Now, it’s also about helping families stay financially secure. Today, Social Security provides these main types of benefits:

• Retirement payments every month for retirees and their spouses who qualify.
• Survivor benefits paid to the family members of a worker who passes away.
• Disability benefits for workers who cannot work because they’re sick or hurt for a long time.
• A small death benefit of $255 for the spouse or dependent child of a worker who dies.

The most important part of Social Security, especially when thinking about retirement, is the money you get each month when you stop working. It is like a paycheck that replaces some of the money you used to earn from your job. For many retirees, Social Security is the safest way they get money because it keeps coming as long as they are alive. Plus, every year, the amount of money you get can go up a little bit to keep up with how prices go up, which is called inflation.

How Social Security is Funded

Social Security gets its money from taxes that workers and their employers pay. It’s like a “pay-as-you-go” deal, where the money paid in taxes right now goes straight to the people getting Social Security benefits. So, the money workers pay in taxes today helps pay for the benefits people get today. When today’s workers retire or need help later, the money they put in will help pay for their benefits. It’s like a cycle that keeps going with each new generation of workers helping the ones before them.

Both employers and employees chip in to pay for Social Security. Almost all American workers help by paying taxes from their paychecks, which is called the Federal Insurance Contributions Act (FICA) tax. This money goes into a special fund called the Old-Age and Survivors Trust Fund, which is used specifically to pay for Social Security benefits.

How Much Social Security Costs

Employers pay a tax of 6.2% on what their workers earn, up to a certain amount, to help with Social Security. They also pay 1.45% of all wages to help with Medicare. If employees earn more than that certain amount, they still pay 1.45% for Medicare on those extra earnings. Employees also pay the same amount of tax as their employers. Altogether, both employers and employees pay 12.4% of a employee’s wages for Social Security (up to that certain amount) and 2.9% for Medicare. These taxes are often called FICA taxes.

Some people who earn a lot of money must pay extra for Medicare. This extra tax, called the Medicare Hospital Insurance (HI) tax, is 0.9% of their earnings. It applies to people who make:

• $250,000 or more if they’re married and file their taxes together,
• $200,000 or more if they’re single or the head of their household,
• $125,000 or more if they’re married but file their taxes separately.

If you work for yourself, you have to pay a special tax called self-employment tax. It’s like paying both the boss’s and the worker’s part of Social Security and Medicare taxes combined. This means you are paying the whole 15.3% tax. But, when you file your taxes, you can take off a bit of the Social Security tax you paid. Unfortunately, you can’t take off any of the extra 0.9% Medicare tax, though.

Let’s look at an example to understand how FICA taxes work. Imagine there’s a limit to how much of your salary can be taxed for Social Security. In 2024, that limit was $168,600. Any money you make above that limit won’t have Social Security taxes taken out. But, all your earnings are still subject to Medicare taxes.

Who Covered Workers Are

People who pay FICA payroll taxes are often called covered workers. Usually, covered workers don’t get to decide if they’re covered or not. It depends on whether their employer takes part in the Social Security system. Some workers, though, aren’t covered by the system at all.

Here’s how different government workers are covered:

• Many federal government workers hired before 1984 have their own retirement plan called the Civil Service Retirement Act.
• Some state and local government workers have retirement plans from their own governments instead of Social Security. But all state and local government workers hired after March 1986 are covered by Medicare, even if they’re not covered by Social Security.
• Federal railroad workers are covered by the Railroad Retirement system. But, some workers have benefits from both the Railroad Retirement and Social Security systems.

Even if someone is paying money into the Social Security retirement system, they might not be able to get benefits yet. Being eligible for benefits depends on something called credits, which are earned based on how much money you make.

Social Security Retirement Benefits

To get full retirement benefits, you need to earn something called credits. You must earn 40 credits to qualify. You earn one credit for making a certain amount of money. You can earn up to four credits in one year.

For example, in 2024, for every $1,730 you earned from working or being self-employed, you got one credit. You’d earn all four credits for that year once you made $6,920. But no matter how much you earn; you can’t get more than four credits in a year. So, usually, you need to work for about ten years to qualify for Social Security retirement benefits. Once you have 40 credits, you’re fully insured.

Social Security Survivor Benefits

Social Security doesn’t just help retirees. If a worker who qualifies for Social Security dies, their spouse, children, and dependents can get monthly payments too. The number of credits needed for these survivor benefits depends on how old the worker was when they passed away. Usually, if someone dies younger, their family needs fewer credits to get survivor benefits. But, no matter what, nobody needs more than ten years of work (or 40 credits) to get any Social Security benefits.

There’s a special rule for survivor benefits too. If a worker earned six credits in the three years before they died, their spouse and dependent children can get survivor benefits. This means the worker only needed to work for about one and a half years in those three years. If a worker earned at least six credits during this time, they’re considered to be currently insured.

Social Security Disability Benefits

Social Security doesn’t just help people who are retired or survivors of workers. It also helps people who are disabled and can’t work. But to get these benefits, the person has to be really unable to do any kind of job that pays well. Their disability also has to be expected to last at least a year, or it’s something that might cause them to die sooner.

To qualify for disability benefits, the person also needs to have worked and earned a certain number of credits in Social Security. How many credits they need depends on how old they are when they become disabled. For example, if someone gets disabled before they turn 24, they need to have earned six credits in the three years before they got disabled. If they’re between 24 and 31 years old, they need to have worked half the time between when they turned 21 and when they got disabled. And for people who are 31 or older, they need to have earned different amounts of credits based on their age, up to a maximum of 40 credits when they’re 62 or older.

Calculating the Social Security Benefit Amount

Originally, Social Security was meant to give retired people some money to live on when they stopped working, along with other money they might have from things like pensions, savings, or other stuff they own. But as time passed, Social Security has become important for most retired people. And the older they get, the more they rely on Social Security to help them with their money.

Even if retired people have money from other places for when they stop working, Social Security is still a big part of their plan for retirement. How much money do retired people usually get from Social Security? Let’s look at the average amounts people were getting in 2024:

Here’s how much money different people might get from Social Security each month:

• Retired workers get around $1,907.
• A couple where both are retired might get about $3,033 each month.
• A widowed mom with two kids could get about $3,653 monthly.
• Disabled workers usually get around $1,537.
• Widows or widowers over 60 might get about $1,773 monthly.

These numbers are just averages, which means some people might get more money, and some might get less. The most someone can get from Social Security in 2024 if they claim it when they’re supposed to retire is $3,822 each month.

Social Security Cost of Living Adjustments (COLAs)

Social Security retirement benefits go up with inflation, so they keep their value over time. This means that as prices for things go up, Social Security payments go up too. This is important because it helps retirees keep up with the cost of living. Unlike some other types of retirement money, like pensions, Social Security payments are adjusted for inflation.

However, it’s important to know that just because Social Security payments are supposed to go up with inflation, they might not go up every year. If prices don’t change, then Social Security payments might stay the same too.

Calculating Social Security Retirement Benefits

One of the first things people usually want to know is, “How much money will I get from Social Security?” A few different things can change how much someone gets, like if they keep working even after they start getting Social Security. But the main things that decide how much someone gets are:

1. How much money they earned in the past.
2. How old they are when they decide to get their benefits.

Social Security Earnings History

Social Security retirement benefits are calculated using something called the average indexed monthly earnings (AIME). This is like adding up all the money someone earned from work over their best 35 years and then finding the average amount earned each month. If someone didn’t work for a full 35 years, the missing years are counted as earning zero money.

The AIME considers how much money was earned over the years and adjusts it for things like inflation and cost-of-living changes. From the AIME, the Social Security figures out the primary insurance amount (PIA). This is the main number used to decide how much money someone gets each month when they retire, or if they become disabled, or if they pass away and their family gets benefits.

The higher the AIME, the more money someone gets each month. But even though people with higher AIMEs get more money overall, the percentage of their earnings replaced by Social Security is usually less than those who earned less. So, the more someone earned before they retired, the less of their income Social Security replaces.

The Social Security Administration sends a special paper called the Social Security Statement to people who are at least 60 years old and haven’t started getting benefits yet. If you’re 18 or older, you can also check your benefits online. This statement gives you an idea of how much money you might get from Social Security when you retire, if you become disabled, or if you pass away.

You can also ask Social Security to send you a form that shows how much money you’ve earned over the years and gives estimates of your future benefits. If you find mistakes on this form, you should let Social Security know and show them proof of how much you actually earned.

Age at Social Security Benefit Claim

The other thing that decides how much money someone gets from Social Security when they retire is when they choose to start getting it. There are three choices:

1. They can start getting benefits as early as age 62.
2. They can wait until they’re 70 years old to start getting benefits.
3. Or they can choose to start getting benefits somewhere in between those ages.

Choosing to get benefits early means getting less money than if you wait. But if you wait longer, you get a bigger benefit. Here’s how it works:

• If you claim benefits at age 62, you’ll get less money each month.
• If you wait until age 70, you’ll get more money each month.
• This chart shows how much less or more you’ll get compared to waiting until your full retirement age, which is usually around 67.

For a long time, people got their full Social Security retirement benefits at age 65. But for folks born in 1938 or later, this age has gone up. Full retirement age (FRA) is when you get your whole retirement benefit. For example:

• If you were born between 1943 and 1954, your FRA is 66.
• If you were born in 1960 or after, your FRA is 67.

Scheduled FRAs
Year of Birth	Full Retirement Age
Before 1938	65
1938	65 and 2 months
1939	65 and 4 months
1940	65 and 6 months
1941	65 and 8 months
1942	65 and 10 months
1943–1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months
1960 or later	67
The Social Security Administration also refers to FRA as “normal retirement age,” or NRA.

Others Eligible for Benefits

Did you know spouses can get Social Security benefits based on their own work history or by being married to someone who earned benefits? If a spouse doesn’t work, they might still get benefits based on their partner’s earnings. Here’s how it works:

• The spouse of someone who worked enough gets a benefit equal to half of that worker’s benefit, but only if the spouse claims at their full retirement age.
• Kids who are under 18 (or disabled) can also get benefits based on their parent’s earnings.

Applying for Social Security Benefits

No matter when you want to start getting Social Security money, you need to tell the Social Security Administration (SSA) by applying for it. Your benefits won’t start on their own when you retire or turn full retirement age. You can apply online on the SSA website, call them for help at 800-772-1213, or even visit a Social Security office in person to apply.

Required Information

Here’s what you might need when applying for Social Security:

• Your Social Security number
• Your birth certificate
• W-2 forms or tax returns if you’re self-employed from the previous year
• Papers showing your military service if you served
• Your spouse’s birth certificate and Social Security number if they’re applying too
• Your marriage license if you’re applying for benefits as a spouse
• Proof that you’re a U.S. citizen or legally living in the U.S.
• Your bank info if you want your benefits deposited directly into your bank account.

Time Frame for Applying for Social Security Benefits

You can start getting retirement benefits when you turn 62, and you can apply for them as early as three months before your 62nd birthday. If you’re not 62 yet, you should apply no more than four months before you want your benefits to begin. That’s because the Social Security Administration won’t accept applications for later starting dates. After you apply, you’ll get your benefits the month after they’re due. So, if your benefits start in April, you’ll get your first check in May.

Just remember, there’s a special rule for people already getting Social Security disability benefits when they reach full retirement age. They don’t need to apply again. Instead, their disability benefit will automatically switch to retirement benefits when they reach full retirement age.

Social Security and Medicare

Once someone has worked and paid FICA taxes for at least ten years and turns 65, they’ll probably qualify for Medicare. Part A, which helps with hospital costs, usually comes premium free for those who qualify. Part B, which helps with medical services, is a choice and needs signing up for, plus paying a monthly premium of $174.70 in 2024. This premium can be paid monthly or every three months. Once someone starts getting Social Security retirement benefits, the premium for Part B gets taken out of their retirement payment automatically.

Social Security has been helping many working Americans by providing monthly retirement benefits since 1935. Retirees count on these benefits as their main source of retirement money. To get retirement benefits, a person usually needs to work for about ten years. How much someone gets in retirement money depends on how much they earned while working and when they choose to start getting benefits. Remember, Social Security benefits don’t start on their own when someone retires or hits full retirement age. You need to apply to get them.