First created in 1935 as part of then-President Franklin D. Roosevelt’s New Deal, the Social Security Administration (SSA)—originally called the Social Security Board—sprang out of a need to assist the millions of retired or elderly Americans who had lost everything in the Great Depression. After the program was launched, it was expanded to help children, widows, and disabled people who might otherwise become destitute.
Today, the SSA, an independent agency of the federal government, still oversees those social insurance programs, each with specific requirements that must be met to be eligible to collect benefits.
- The Social Security Administration oversees social insurance programs that provide retirement, survivor, and disability benefits to Americans.
- To qualify for retirement benefits, a worker must pay into Social Security, earning 40 credits over a minimum of 10 years, and cannot make a claim before age 62.
- Spouses and children also may be able to claim Social Security survivor benefits based on a worker’s earnings history.
- Only workers who meet the SSA’s strict definition of disability and have earned enough credits are eligible for disability benefits.
3 Types of Social Security Benefits
There are three types of Social Security benefits:
- Retirement benefits
- Survivor benefits
- Disability benefits
There are a number of misconceptions about the Social Security system, so let’s look at how these three forms of benefits actually work.
1. Social Security Retirement Benefits
For many Americans, the words “Social Security” are synonymous with retirement, and the retirement program of the SSA is the largest wing of the organization. Retirees and their dependents account for approximately 75% of total Social Security benefits paid.
How Does Social Security Work?
While employed, you pay a 6.2% Social Security tax on earnings up to a maximum amount ($147,000 in 2022), and your employer pays a matching 6.2%. If you are self-employed, then you are responsible for the entire 12.4% tax yourself.
The money is not held in a personal account, such as a bank account. Rather, the money that you pay into Social Security today goes to provide monthly benefits for current retirees and other Social Security recipients.
How Do You Qualify?
To qualify for Social Security retirement benefits, you generally need to have worked for at least 10 years. The SSA assigns credits to your paid taxes—for 2022, you earn one credit for every $1,510 in earnings, with a maximum of four credits earned each year. Most people will need 40 credits before they can claim Social Security retirement benefits.
You can get an estimate of how much your monthly retirement payments will be by entering basic information into the SSA Retirement Estimator.
When Can You Collect Social Security?
Many people still think of age 65 as the age to retire, but that has changed. To collect full benefits, you cannot apply for Social Security until you are:
- 66, if born in the 1943–1954 range
- 66 and 2 months, if born in 1955
- 66 and 4 months, if born in 1956
- 66 and 6 months, if born in 1957
- 66 and 8 months, if born in 1958
- 66 and 10 months, if born in 1959
- 67, if born in 1960 or later
If you delay retirement to age 70, then you will receive increased Social Security benefits. The percentage will depend on the year you were born, with a maximum 8% increase as the max. You can also choose to start collecting Social Security benefits as early as age 62, but your benefits will be reduced.
What About Cost-of-Living Increases?
You’ve probably noticed that the price of just about everything goes up each year. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to calculate annual cost-of-living adjustments (COLAs) for Social Security benefits.
Since 1975, there has been an automatic annual COLA in Social Security benefits every year. That increase has ranged from 0% (in years when there was no increase in the CPI-W) to a high of 14.3% in 1980. For 2022, the COLA is 5.9%, with the average monthly benefit increasing to $1,657 in 2022 for retired workers.
What About Your Spouse and Children?
Your spouse may also receive Social Security benefits once you retire, even if they never worked outside the home. If your spouse is at least 62 years old, then they can apply for benefits at a reduced rate. By waiting until full retirement age, however, your spouse can receive up to half the amount of your monthly benefits. Payments received by your spouse do not lower your own payments.
Your ex-spouse can also collect Social Security based on your earnings. To qualify, ex-spouses must meet the following conditions:
- The marriage must have lasted at least 10 years
- Two or more years must have passed since the divorce
- They must not have remarried
- They must be at least 62 years old and must not qualify for higher Social Security benefits based on their own employment history
If you reach retirement age and have children who are below age 18—or 19 and still enrolled in elementary or secondary school, or older than 18 but severely disabled—then those children may also qualify to receive benefits based on your monthly entitlement. Your children can receive monthly payments up to half of the amount to which you are entitled, and these payments will not decrease your own Social Security benefits.
The limit for benefits received by your spouse and children varies but is normally 150% to 180% of your full retirement benefits.
2. Social Security Survivor Benefits
Even after you die, Social Security can continue to pay benefits to your spouse and children—and even to your parents, if you were supporting them. For your family to receive survivor benefits, you’ll need to have earned at least six Social Security credits in the three years before your death.
Along with a one-time lump-sum payment of $255, your surviving spouse and children may each qualify for 71.5% to 100% of your Social Security payments, up to a maximum of 150% to 180% of your benefit rate. Eligibility for survivor benefits requires that:
- Surviving spouse is at least 60 or older
- Surviving spouse is 50 or older and disabled
- Surviving spouse is caring for your child who is younger than 16 or disabled
- Children who are younger than 18
- Children younger than 19 and enrolled in elementary or secondary school
- Children older than 18 who are severely disabled
- Your surviving parents if they were dependent on you for at least half of their support
The number of people who received Social Security benefits in 2021, according to the SSA.
3. Social Security Disability Benefits
The definition of “disabled” held by the SSA is quite strict. You only qualify for Social Security disability benefits if you are severely disabled with a condition that entirely prevents your working—and is expected to last a year or longer or result in your death.
You also must have earned enough credits to receive payments. If you are at least age 62, you will need to have earned the full 40 credits to qualify for disability payments. Younger applicants require fewer credits, down to a minimum of six credits for those younger than 24. You also need to have been working when the disability began.
Your spouse and children may qualify for benefits as well, potentially receiving up to half of the amount to which you are entitled each month.
If approved, then your disability benefits will begin six months after the date when your disability began. Payments are based on your lifetime earnings.
The Bottom Line
You probably will receive Social Security benefits at some point during your lifetime—most likely at retirement, but possibly earlier if you receive disability or survivor benefits. In most cases, Social Security payments likely will not be enough to support a comfortable retirement, but they can be an important part of your complete retirement plan.