Social Security: Benefits for Retirees, Survivors, and Disabled Workers

What Is Social Security?

Social Security is the Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States. It's run by the Social Security Administration (SSA), a federal agency. It's best known for retirement benefits, but it also provides survivor benefits and income for workers who become disabled.

To be eligible for Social Security retirement benefits, you must have earned at least 40 work credits (one credit is earned for a specific amount that changes yearly, with a maximum of four credits earned per year).

You must meet several requirements to be eligible for disability, depending on your age. Survivor benefits are paid based on your age and the number of credits you have earned.

Understanding the Social Security System

Social Security works like insurance. Most workers pay into it through payroll withholding from their paychecks. Self-employed workers pay when filing taxes.

Workers can earn four credits a year. In 2024, you earn one credit for every $1,730, up to $6,920.

The money goes 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 disability beneficiaries. These two funds are used to pay benefits to people who are currently eligible for them. The money that's not spent remains in the trust funds.

A board of trustees oversees the financial operations of the two Social Security trust funds. Four of the six members are the secretaries of the Departments of Treasury, Labor, and Health and Human Services, and the Commissioner of Social Security. The remaining two members are public representatives appointed by the president and confirmed by the Senate.

Medicare is the federal health insurance program for Americans who are age 65 and older and some people who are receiving Medicare benefits due to disability. It's also supported through payroll withholding. This money goes into a third trust fund that's managed by the Centers for Medicare & Medicaid Services (CMS).

Social Security provides benefits to retirees, their survivors, and workers who become disabled.

Eligibility for Retirement Benefits

Workers paying into Social Security for at least 10 years can retire early and receive benefits starting at age 62. Waiting until your full retirement age (FRA) (between ages 66 and 67, depending on the year you were born) results in higher monthly benefits. You'll receive even more if you delay collecting retirement benefits until age 70, but benefits don’t continue to increase if you wait any longer than that.

Spouses can claim benefits using their own or their partner's earnings records. A divorced spouse who isn't currently married can receive benefits based on an ex-spouse’s earnings record if the marriage lasted at least 10 years. Children of retirees can also receive benefits until they turn 18 or longer if the child is disabled or a student. The cutoff is age 16 if you're caring for a child who isn't your own.

Calculating Your Social Security Benefits

Your Social Security retirement benefit is based on your average indexed monthly earnings (AIME) during your 35 highest-earning years. Amounts will differ significantly among retirees. The average monthly retirement benefit was $1,869.77 as of June 2024.

Your annual amount increases by 8% for each year that you delay collecting benefits if your retirement age is 66 to 67. This starts with the year after you reach your full retirement age and it stops at age 70. Those who begin taking Social Security when they reach the FRA of 66 would receive 100% of their primary insurance amount (PIA). They'd receive 108% of their PIA if they delayed taking benefits until the following year. They would receive 132% by delaying until age 70.

The benefit varies depending on when you begin taking it. The maximum monthly benefit for people aged 62 is $2,710 ($32,350 annually) in 2024. It's $4,873 ($58,476 annually) for those who have reached age 70.

Social Security provides a special minimum benefit for long-term low earners that was first enacted in 1972. You need 11 years of income to qualify. As of December 2023, the minimum monthly benefit was $50.90. It increases for each additional year of low-income work, topping out at $1,066.50 or $12,798 annually for people who have worked for 30 years.

Eligibility for Disability Benefits

People who can’t work due to a physical or mental disability that's expected to last for a year or more or result in death may be eligible for Social Security disability benefits (SSDI). You generally have to meet certain earnings tests to qualify. Family members of disabled workers can also be eligible.

How Much Can I Get in Disability Benefits?

About 8.3 million Americans were collecting SSDI benefits as of June 2024. The average monthly benefit was $1,398.08, and for disabled workers, it was $1,537.70. Spouses of disabled workers received an average of $420.74 monthly ($5,048.88 annually). Children of disabled workers received $493.19 monthly.

Eligibility for Survivor Benefits

The spouse and children of a deceased worker may be eligible for survivor benefits based on the worker’s earnings record. This includes surviving spouses who are age 60 or older or age 50 or older and disabled. A surviving spouse who is caring for a child who is younger than 16 or disabled may be eligible for these benefits as well.

Children must generally be younger than 18 or disabled to receive benefits. A stepchild, a grandchild, a step-grandchild, or an adopted child may also qualify for benefits under certain circumstances.

Parents who are age 62 or older and who were dependent upon a deceased worker for at least half their income may also be eligible to collect benefits. Surviving spouses and minor children are also entitled to a one-time payment of $255 after an eligible worker’s death under some circumstances.

Determining Survivor Benefit Amounts

Approximately 5.8 million people were collecting survivor benefits as of June 2024. The average monthly benefit was $1,507.76 or $18,093.12 annually. Survivor benefits are broken down into five categories. Average payments in June 2024 were:

• Children of deceased workers: $1,105.32 monthly ($13,263.84 annually)
• Widowed mothers and fathers: $1,279.53 monthly ($15,354.36 annually)
• Nondisabled widow(er)s: $1,784.09 monthly ($21,409.08 annually)
• Disabled widow(er)s: $927.89 monthly ($11,134.68 annually)
• Parents of deceased workers: $1,618.45 monthly ($19,421.40 annually)
  

A Brief History of Social Security

The Social Security system was created on Aug. 14, 1935, when President Franklin D. Roosevelt signed the Social Security Act into law. The first monthly benefits checks became payable on Jan. 1, 1940. Ida M. Fuller, a retired legal secretary in Vermont, was the first person to collect one. Her check was for $22.54.

Since 1935, Social Security's rules have changed. It's now one of the world's largest programs, distributing billions yearly.

Future Challenges and Projections for Social Security

There are concerns about fewer workers supporting more retirees as the U.S. population ages and living costs rise.

In its 2024 report, the Social Security Board of Trustees estimated that reserves in the retirement fund (OASI Trust Fund) will become depleted in 2033. This was unchanged from the previous year's projection. Ongoing tax revenue will be enough to pay only 79% of scheduled benefits after that time.

The report also projected that reserves of the Hospital Insurance (HI) Trust Fund that finances Medicare Part A will be depleted in 2036. This is five years later than projected in 2023. The program income will be able to cover 89% of scheduled benefits after 2036.

If predictions hold, Congress must address gaps by possibly raising taxes, reducing benefits, or increasing retirement ages.

The Bottom Line

The Social Security program is the cornerstone of most Americans' retirement, serving more than 72 million people with inflation-linked cost-of-living adjustments. That said, it's essential to note that the program is expected to exhaust its reserves by 2033, which will likely result in lower benefit amounts for recipients.

Benefit amounts vary depending on income and years of employment. Surviving spouses, children, parents, and disabled workers, as well as their family members, may also be eligible to collect benefits in addition to those of retired workers.

The average benefit amount is based on average indexed monthly earnings ($20,000 annually), with variations depending on when benefits are first collected. The program shouldn't be relied on as a sole source of retirement income. Instead, it should be considered a safety net and supplemented with other sources of retirement funding, such as individual retirement accounts (IRAs), employer-sponsored plans like 401(k) s or 403(b) s, and other savings and investments.