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Social Security, Medicare & insurance · Financial term

Social Security

Also called OASDI · Social Security benefits · Social Security retirement benefits · Old-Age, Survivors, and Disability Insurance

What is Social Security?

Social Security is the federal social insurance program that pays monthly retirement, disability and survivor benefits, formally called Old-Age, Survivors, and Disability Insurance (OASDI). Workers and employers each pay a 6.2% payroll tax on wages up to $184,500 in 2026. After 40 work credits, you can claim an inflation-adjusted benefit for life, based on your highest 35 years of earnings, as early as age 62.

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How Social Security works and who it pays

Social Security runs largely on a pay-as-you-go basis. Payroll taxes from today’s workers pay today’s beneficiaries, and any surplus is held in trust funds invested in special US Treasury securities. Employees pay 6.2% of wages up to the $184,500 wage base for 2026, and employers pay another 6.2%. Self-employed people pay both halves, 12.4%, through self-employment tax. Together with the Medicare share, these make up the FICA tax on a paycheck.

For most retirees, Social Security is the base layer of income: a check that lasts for life, rises with prices and needs no investment decisions. That makes it protection against longevity risk and a steady floor under a portfolio exposed to market swings.

At the end of 2025, 62.3 million people received retirement or survivor benefits and 8.2 million received disability benefits, while an estimated 184.7 million people paid Social Security payroll tax during the year. Benefits go to:

  • Retired workers with 40 work credits, from age 62.
  • Disabled workers who can no longer work at a substantial level. In 2026, earnings above $1,690 a month, or $2,830 if blind, generally count as substantial work.
  • Spouses, and ex-spouses after a marriage of at least 10 years, through spousal benefits worth up to 50% of the worker’s full-retirement-age amount.
  • Widows and widowers from age 60, through survivor benefits worth up to 100% of the deceased worker’s benefit.
  • Children of retired, disabled or deceased workers, and some dependent parents of a worker who has died.

Who qualifies and how your benefit is figured

You earn up to four work credits a year. In 2026, each $1,890 of covered earnings earns one credit, so $7,560 earns all four. Forty credits, roughly 10 years of work, make you eligible for retirement benefits, and extra credits do not raise the check.

The amount depends on your earnings, not your credits. SSA indexes each year’s earnings before age 60 to national wage growth, picks your highest 35 years and averages them into your average indexed monthly earnings (AIME). If you have fewer than 35 years of earnings, the missing years count as zeros. A formula set by law then turns AIME into your primary insurance amount (PIA), the monthly benefit payable at full retirement age.

The formula is deliberately progressive. It replaces 90% of the first slice of average earnings, 32% of the middle slice and only 15% of the top slice, so lower earners get back a larger share of what they earned. Earnings above the yearly wage base are neither taxed nor counted.

When you can claim retirement benefits

You can start retirement benefits in any month from 62 to 70. The anchor is your full retirement age, 67 for anyone born in 1960 or later, when you receive 100% of your PIA. Claiming at 62 cuts the check by up to 30% for life. Waiting past full retirement age earns delayed retirement credits of 8% a year, so a claim at 70 pays 124% of PIA. Nothing more is gained by waiting beyond 70.

Because the choice trades smaller checks sooner for larger ones later, many people look for a break-even age. For a married couple, the higher earner’s claiming age matters twice: it sets that person’s own check and, because a widow or widower keeps the larger of the two benefits, the survivor’s check too.

Claiming before full retirement age while still working brings in the earnings test, which can hold back part of your benefits for a while. Withheld benefits are not lost: SSA raises your check at full retirement age to credit them back.

How Social Security is taxed and adjusted for inflation

Benefits rise each January with a cost-of-living adjustment (COLA) based on the CPI-W price index. The COLA for 2026 is 2.8%.

Up to 85% of benefits can be federally taxable. The test uses provisional income: your other income, plus tax-exempt interest, plus half your benefits. Above $25,000 for single filers or $32,000 for joint filers, up to 50% of benefits become taxable; above $34,000 or $44,000, up to 85%. The 85% is the most of your benefit that counts as income, not a tax rate. None of these thresholds is indexed to inflation, and the first two date from the 1983 amendments, so more retirees cross them every year.

The senior deduction of $6,000 per person 65 or older for 2025–2028 lowers taxable income for many retirees, but it does not exempt benefits from tax. Most states do not tax benefits; a handful tax part of them, often with income-based exemptions, so check your state’s rules.

Will Social Security run out?

Not entirely, but it faces a funding gap. The 2026 Trustees Report projects that the retirement and survivors trust fund can pay full scheduled benefits until the fourth quarter of 2032. After that, continuing payroll and benefit-tax income would still cover about 78% of scheduled benefits unless Congress acts. Counting the retirement and disability funds together, full benefits last until the third quarter of 2034, when 83% would remain payable.

Emptying the reserves does not end the program, because workers keep paying in. Congress has closed a gap before: the Social Security Amendments of 1983 sped up scheduled payroll tax increases, began taxing some benefits and raised the full retirement age from 65 to 67 in stages. Because no one knows what the next fix will be, some planners test a scenario in which benefits drop by about a fifth in the early 2030s, to see how much a plan depends on the full amount.

Illustrative numbers

How much of your pay Social Security replaces, for a worker turning 62 in 2026

Formula
PIA = 90% × (AIME up to $1,286) + 32% × (AIME from $1,286 to $7,749) + 15% × (AIME above $7,749)
AIME
Average indexed monthly earnings: your highest 35 years of wage-indexed earnings, averaged per month
$1,286 and $7,749
The 2026 bend points, which apply to workers who turn 62 in 2026
PIA
Primary insurance amount: the monthly benefit at full retirement age, rounded down to the dime

The percentages are fixed by law; the bend points move each year with national wages and lock in the year you turn 62, and COLAs raise the PIA from then on.

Average indexed monthly earnings (about $60,000 a year)$5,000

90% of the first $1,286$1,157.40

32% of the next $3,714 ($5,000 − $1,286)$1,188.48

PIA at 67, rounded down to the dime$2,345.80, 47% of average pay

Claim at 62 (70% of PIA)About $1,642, 33% of average pay

Claim at 70 (124% of PIA)About $2,909, 58% of average pay

The same record replaces anywhere from about a third to nearly 60% of this worker’s average indexed pay, depending only on claiming age, and later COLAs raise every dollar figure.

At a glance

Social Security key figures for 2026

Item2026 figure
Social Security payroll tax6.2% employee + 6.2% employer (12.4% self-employed)
Maximum taxable earnings$184,500
Earnings for one work credit$1,890 (four credits: $7,560)
Credits needed for retirement benefits40
Retirement claiming ages62 to 70; full retirement age 66–67, or 67 if born 1960 or later
Cost-of-living adjustment2.8%
Maximum benefit at full retirement age$4,152 a month
Average retired-worker benefit (January)$2,071 a month
Earnings test limit, under full retirement age$24,480 a year
Benefit tax thresholds (provisional income)$25,000 single; $32,000 joint

Put it in your plan

Social Security in MoneyWhatIf

Add a Social Security income card for each earner and choose “Estimate from my record” or “Enter an amount.” With an estimate, MoneyWhatIf reads your statement figure as your full-retirement-age benefit at today’s prices, can fold the plan’s own future wages into the 35-year average, applies SSA’s monthly early or delayed factors for your claiming month, and grows the benefit with plan inflation. For a couple it adds a spousal excess where half the worker’s record is larger, and the survivor keeps the larger benefit. Taxable benefits follow the provisional-income formula.

How the model handles itSocial Security Retirement Benefits How the model handles itTaxation of Social Security Benefits How the model handles itPayroll and Self-Employment Taxes How the model handles itHousehold and Survivor Planning FeatureRetirement planning
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Common questions

Social Security FAQs

How much Social Security will I get?

Your personal estimate is in your Social Security Statement, which you can view by creating a my Social Security account at ssa.gov. It shows estimated monthly benefits at nine claiming ages, from 62 to 70, based on your actual earnings record. As a benchmark, the average retired worker received about $2,071 a month in January 2026, and the most anyone retiring at full retirement age could receive was $4,152.

Can I work and collect Social Security at the same time?

Yes. From the month you reach full retirement age, earnings do not reduce your benefit at all. Before then, SSA withholds $1 for every $2 you earn above $24,480 in 2026, or $1 for every $3 above $65,160 in the year you reach full retirement age, counting only months before it. Only wages and self-employment income count, and SSA later raises your benefit to make up for months withheld.

Can I get Social Security if I never worked?

Not on your own record, but you may qualify through a spouse’s. A husband or wife who is at least 62 can receive up to 50% of the worker’s full-retirement-age benefit once the worker has filed, a divorced spouse can qualify after a marriage of at least 10 years, and a widow or widower can claim from age 60. None of these requires work credits of your own.

Is Social Security the same as SSI?

No. Social Security pays benefits earned through covered work, whatever your income or savings. Supplemental Security Income (SSI) is a needs-based program for people with limited income and resources who are 65 or older, blind or disabled. It is financed from general Treasury funds, not Social Security taxes. In 2026 the federal SSI payment is up to $994 a month for an individual, and countable resources must stay at or below $2,000.

What happened to the Windfall Elimination Provision and Government Pension Offset?

The Social Security Fairness Act, signed on January 5, 2025, ended both rules for benefits payable from January 2024. They had reduced Social Security for over 2.8 million people who also receive a pension from work not covered by Social Security, such as some teachers, police officers and federal workers under the Civil Service Retirement System. SSA paid the increase back to January 2024. About 72% of state and local workers were in covered jobs and see no change.