Social Security is the program for Old-Age, Survivors, and Disability Insurance (OASDI) in the U.S. It’s managed by the Social Security Administration (SSA), which is a federal agency. While it’s mainly recognized for retirement benefits, it also offers survivor benefits and financial support for those who become disabled.
To qualify for Social Security retirement benefits, you need to have accumulated at least 40 work credits (you earn one credit for a certain amount of income that changes each year, with a maximum of four credits you can earn in a year).
There are various requirements to qualify for disability benefits, which depend on your age. Survivor benefits are determined by your age and the total number of credits you’ve earned.
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It functions like an insurance plan. Most employees contribute to it via payroll deductions from their salaries. Those who are self-employed make payments when they file their taxes.
Workers can accumulate up to four credits each year. In 2024, you earn one credit for every $1,730 earned, with a maximum of $6,920.
The funds are allocated into two Social Security trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund for retirees and the Disability Insurance (DI) Trust Fund for those receiving disability benefits. These funds are utilized to provide benefits to eligible individuals. Any unspent money stays within the trust funds.
A board of trustees manages the financial activities of the two Social Security trust funds. Four out of the six members include the secretaries from the Departments of Treasury, Labor, and Health and Human Services, along with the Commissioner of Social Security. The other two members are public representatives chosen by the president and approved by the Senate.
Medicare is the federal health insurance program available for Americans aged 65 and older, as well as some individuals receiving Medicare benefits due to disability. It is also funded through payroll deductions. This money is directed into a third trust fund overseen by the Centers for Medicare & Medicaid Services (CMS).
Social Security offers benefits to retirees, their survivors, and workers who become disabled.
The History
| Date | Event / Milestone |
|---|---|
| Aug. 14, 1935 | President Franklin D. Roosevelt signs the Social Security Act into law, providing guaranteed benefits to retired workers 65 or older. |
| Nov. 1936 | The first Social Security cards are issued. |
| Jan. 1, 1937 | The first one-time, lump-sum Social Security payments are issued. |
| Aug. 10, 1939 | Benefits are extended to workers’ dependents and survivors. |
| Jan. 1940 | The first Social Security monthly benefits begin. |
| Oct. 1950 | Congress authorizes the first cost-of-living adjustment (COLA). |
| Aug. 1, 1956 | Amendments provide benefits to workers ages 50–64 with disabilities and allow women to claim reduced benefits at 62. |
| Sept. 1960 | President Dwight Eisenhower expands eligibility for disability benefits to workers of any age and their dependents. |
| June 30, 1961 | Retirement benefits age lowered to 62 for all workers. |
| July 30, 1965 | President Lyndon Johnson signs Medicare and Medicaid into law as amendments to the Social Security Act. |
| July 1, 1972 | President Richard Nixon establishes automatic annual COLA (starting in 1975) and yearly taxable wage base adjustments. |
| Oct. 30, 1972 | Congress creates Supplemental Security Income (SSI). |
| July 1975 | First automatic annual COLA takes effect. |
| Sept. 20, 1977 | President Jimmy Carter raises payroll tax rates for Social Security and Medicare. |
| July 1980 | Beneficiaries receive the highest COLA to date: over 14%. |
| April 20, 1983 | President Ronald Reagan signs amendments: raises retirement age to 67, increases taxes, and makes 50% of benefits taxable above certain income levels. |
| Oct. 1, 1988 | Nationwide toll-free number for the SSA established. |
| Aug. 10, 1993 | President Bill Clinton raises taxable share of benefits up to 85% for higher incomes. |
| May 17, 1994 | The SSA’s official website launches. |
| Oct. 1, 1999 | Social Security statements begin being mailed. |
| April 7, 2000 | Senior Citizens’ Freedom to Work Act signed: eliminates Retirement Earnings Test for those at full retirement age. |
| May 1, 2012 | Social Security statements made available online. |
| Nov. 2, 2015 | President Barack Obama reallocates funds to save the Disability Insurance trust fund. |
| Jan. 5, 2025 | President Joe Biden signs the Social Security Fairness Act, repealing WEP and GPO reductions for public sector workers. |
| Today | Future of Social Security uncertain; proposals include reducing benefits, raising taxes, or creating new revenue streams. |
Conclusion
The Social Security program is a key part of retirement for most Americans, helping over 72 million people with cost-of-living adjustments tied to inflation.
However, it’s important to keep in mind that the program is projected to run out of its reserves by 2033, which could lead to reduced benefits for those receiving them.
Benefit amounts differ based on your income and how long you’ve worked. Surviving spouses, children, parents, and disabled workers, along with their family members, might also qualify for benefits in addition to what retired workers receive.
The average benefit is calculated from average indexed monthly earnings (around $20,000 a year), and it can change depending on when you start collecting benefits. You shouldn’t depend solely on this program for retirement income. Instead, think of it as a safety net that should be backed up with other retirement funding sources, like individual retirement accounts (IRAs), employer-sponsored plans such as 401(k)s or 403(b)s, and other savings and investments.