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The age at which you start collecting Social Security benefits plays a big role in the amount you’ll receive.
Jose Luis Pelaez/Getty
Social Security is a federal program that provides retirement income and disability benefits.
The Social Security program is funded by payroll taxes and is one of the largest areas of US federal spending.
Starting to collect Social Security retirement benefits later rather than sooner can bring a significant financial bonus.
Social Security is a federal insurance program funded by payroll taxes that provides income to retirees and workers with disabilities. The main benefit of Social Security includes monthly payments, which can also be passed on to spouses, children, and survivors of the original beneficiary.
The Social Security program was established during the Great Depression, with the first monthly benefit checks distributed in January 1940. The system has changed and evolved over the years and is now one of the largest categories of federal spending.
Here’s everything you need to know about Social Security in 2023.
What is Social Security?
The Social Security program is funded through federal payroll taxes. If you collect a paycheck, your employer will withhold a portion of what you earn to go toward Social Security. If you’re self-employed, you’ll pay these taxes yourself.
“To better understand Social Security, it may be helpful to know that the official name is the Old, Age, Survivors, and Disability Insurance (OASDI) program,” says Jay Zigmont, CFP and founder of Childfree Wealth. “While OASDI may not be as catchy of a term as Social Security, it does explain the program.”
For every $1 that goes toward Social Security, $0.85 goes to a trust fund that pays the monthly benefits to everyone who currently files for Social Security. The other $0.15 goes to a trust fund that pays benefits to people with disabilities and their families.
If you do the math, you’ll see that over the course of your career, you’ll contribute a substantial portion of your income to the Social Security program. And so do hundreds of millions of other taxpayers. All that money is pooled together to support what has become a vast program that retirees, workers with disabilities, and their survivors rely on for economic security.
On top of Social Security benefits, you can start savings for retirement with some of the best retirement plans, such as traditional IRAs, Roth IRAs, and employer-sponsored 401(k)s.
How does Social Security work?
You may see the Social Security tax accounted for on your paycheck under a category called FICA, which stands for the Federal Insurance Contributions Act. It allows for tax withholdings to fund Social Security and Medicare.
The Social Security portion for 2023 is 6.2% for the employee, with an equal match by the employer, for a total of 12.4% applied to the first $160,200 of earnings. This is a significant increase from 2022, which applied the 12.4% only to the first $147,000 of earnings.
If you’re self-employed, you’ll have to pay both halves yourself.
What is the full retirement age?
The SSA provides statements with detailed information about how much you’ve paid into the program and estimates of how much you’ll receive in benefits depending on the age at which you retire. You can get one by creating an online account with the agency, or you can request one by mail.
Choosing when to start receiving your retirement benefits is a very important decision.
“For most people, it is best to wait until 70 to receive Social Security benefits, but there are quite a few considerations,” Zigmont says. “When to take your benefits is part of your financial plan that will change the course of your retirement for life.”
While you can start receiving your Social Security retirement benefits as early as age 62, you aren’t entitled to full benefits until you reach your full retirement age. Currently, the full benefit age is 66 years and two months for people born in 1955. It will rise to 67 for those born in 1960 or later.
Birth yearRetirement age1943-195466195566 and 2 months195666 and 4 months195766 and 6 months195866 and 8 months195966 and 10 months1960 or later67
Starting to receive Social Security benefits later rather than sooner can be financially beneficial. For instance, someone who starts at age 70 will get 132% of what they would have gotten as soon as they reached their full retirement age because they delayed getting them for 48 months, according to the SSA. Meanwhile, a worker who chooses to collect at age 62 may see a reduction of as much as 30%.
Regardless of how much you earned or when you retire, you should never rely on Social Security as your sole source of income in retirement. It almost certainly will not be enough. Be sure to include others, such as a 401(k) or IRA, in planning for your life after work. Many financial professionals recommend that you should aim to have between 70% and 80% of your pre-retirement income each year in retirement.
What benefits does Social Security provide?
While it’s mostly associated with retirement, Social Security also provides disability and survivor’s benefits. All of these programs are run by the Social Security Administration (SSA), a federal agency with about 60,000 employees. In 2022, it provided a combined total of approximately $1.2 trillion in payments to more than 66 million Americans per month according to data by Zippia.
The average Social Security benefit payment, as of September 2023, is about $1,707 per month.
Note: As of June 2022, around 182 million people were working and paying Social Security taxes, according to the SSA.
Social Security retirement benefits
To qualify for retirement benefits, you need to have earned at least 40 Social Security “credits,” which are earned by working and paying Social Security taxes. Forty credits equals around 10 years of work.
In 2023, you earn one credit for every $1,640 in net income and can only earn a maximum of four credits per year. But the number of credits you have doesn’t actually determine how much you’ll receive in benefits.
The amount of your Social Security benefits is calculated based on how much you earned in your lifetime. Your actual earnings are adjusted (or indexed) to account for changes in wages since the time you received them. Your average indexed monthly earnings are then calculated for the 35 years you earned the most. A formula is applied to that figure to determine your basic benefit, known as the primary insurance amount (PIA). That’s how much you would receive at your full retirement age.
Quick tip: To get an idea of how much you’ll receive in retirement benefits, use the Social Security retirement estimator.
Social Security disability benefits
You can qualify for Social Security disability benefits if you’re unable to work due to a physical or mental condition that is expected to last longer than a year or result in death. There are two different programs:
Social Security Disability Insurance (SSDI): This program pays benefits to you and certain family members if you are “insured,” meaning you worked long enough, or recently enough, and paid Social Security taxes on your earnings. Supplemental Security Income (SSI): This program pays benefits to adults and children with disabilities who have limited income and resources.
In order to receive benefits from Social Security for a disability, it has to be a total disability. This is not a short-term disability program like workers’ compensation, insurance, or savings account. To qualify, your disability must meet criteria including:
You are unable to work in the future because of your medical condition.You cannot do the work you did previously or adjust to other work due to a recent diagnosis of a medical condition.Your condition has lasted at least a year or will result in your death.
Social Security survivors’ benefits
Under certain conditions, your family can receive Social Security benefits based on your years of work after you die. For surviving spouses, the criteria to receive payments is:
Age 60 or olderAge 50 or older with a qualifying disability Any age if caring for a child who is younger than 16 or has a qualifying disability
For your children to receive Social Security benefits the criteria include:
UnmarriedYounger than 18 years oldBetween 18 and 19 years old, but in secondary school as a full-time studentAge 18 or older with a qualifying disability
The payments survivors receive will be based on a percentage of the deceased family member’s basic Social Security benefit. This range is usually from 75% to 100%. If you find yourself in a survivor’s situation, you can use the Social Security program to help offset lost income due to your family member passing away.
What’s a Social Security number and why is it important?
Virtually everyone who pays taxes in the US has a Social Security number. These unique nine-digit identifiers are often issued in infancy and follow us from the cradle to the grave.
The numbering system was created in the 1930s specifically for tracking income and determining retirement benefits. While Social Security numbers are still used for that purpose, they’ve evolved to become essentially a national identification number used not just by the government but also banks, insurers, cell phone service providers, and all manner of other private businesses.
You need a Social Security number to get a job, open a bank account, insure your automobile, take out a loan, apply for a credit card, get a passport, buy a house, get a driver’s license — and the list goes on. It’s arguably the most important number in our lives. There’s also a Social Security number equivalent for businesses, called an employer identification number (EIN), but you don’t need one if you’re a sole proprietor.
Because they’re so widely used for identification, Social Security numbers also have become prime targets for identity theft. They can use them to do everything from opening up lines of credit to obtaining medical care in your name.
The SSA, which issues Social Security numbers and maintains the records, can issue you a new number as a last resort if someone has been misusing yours and you’ve done all you can to stop them. However, it warns that doing so might not solve your problems.
“For some victims of identity theft, a new number actually creates new problems,” the SSA states in a consumer advisory brochure. “If the old credit information isn’t associated with your new number, the absence of any credit history under your new number may make it more difficult for you to get credit.”
Social Security — Frequently asked questions (FAQs)
What exactly is Social Security?
Social Security is a federal insurance program. It’s funded by payroll taxes that provides income to retirees and workers with disabilities. Your employer will withhold a portion of each paycheck to go toward Social Security. If you’re self-employed, you’ll pay these taxes yourself.
What is Social Security, and why do we have it?
Social Security is an insurance program from the US federal government. It exists because President Roosevelt established it during the Great Depression, and the first monthly benefit checks went out in January 1940. We have Social Security to provide income to retirees and to workers who have disabilities.
What is the full Social Security benefit?
The amount of full Social Security benefits you can receive depends on the age you retire. In 2023, you can receive a maximum benefit of $3,627 per month at full retirement age. Currently full retirement age for folks born in 1960 or later is 67.
How can I find out how much Social Security I will get?
You can access estimated future benefits for different retirement age scenarios with a personal Social Security account. To create an account, go to the SSA website.
At what age do you get 100% of your Social Security?
You can get 100% of your Social Security when you reach the full retirement age. The full retirement age for folks born in 1960 or later is 67. If you were born between 1943 and 1954, your full retirement age is 66. Anyone born from 1955 to 1959 has a full retirement age of 66 plus a few months — the exact number of months depends on the year you were born.
How much does the average person get on Social Security per month?
On average, people get about $1,707 per month in Social Security in 2023. The amount of Social Security you’ll receive varies by the age you retire and how much you earned in your lifetime.
Who gets paid Social Security?
To qualify for Social Security retirement benefits, you need to have earned at least 40 Social Security credits, which you earn by working and paying Social Security taxes. Forty credits comes to around 10 years of work. To receive Social Security benefits for disabilities, you must have an eligible long-term disability.
Getting Social Security benefits
When you want to start receiving your benefits is mainly up to the age you retire. But you may be able to get more if you retire later on. Plus, you can only start receiving the maximum benefit when you reach full retirement age. The current full retirement age for folks born in 1960 or later is 67. If you were born before then, the full retirement age is a little younger.
Although Social Security can be a big help for retirees and people with disabilities, it’s often not enough as a sole source of income. Therefore, it’s in your best interest to save up for retirement through savings accounts, such as IRAs or employer-sponsored plans.