What Is Social Security?

Social Security is a social insurance program intended to prevent poverty in old age, survivorship and disability.

Written by Rae Hartley Beck / July 6, 2022

Quick Bites

  • Social Security is a social insurance program intended to prevent poverty in old age, survivorship and disability.
  • The amount you can get out of Social Security depends on what you—or the person you’re a dependent of—paid into it.
  • If nothing changes, Social Security benefits will have to be cut by 20% in 2035 because of our aging population and declining birth rate.

Social Security is the largest social insurance program in the U.S. Individuals and their employers pay into the program through payroll deductions listed as OASDI, which stands for Old Age, Survivorship and Disability Insurance.

Social Security was created in 1935 with the passage of the Social Security Act as part of Franklin D. Roosevelt’s New Deal, designed to help dig out of the Great Depression.[1] It was originally created to prevent poverty among older Americans and over the years has been expanded to pull more vulnerable people out of poverty, including disabled individuals, widows, and their dependents. An estimated 22.5 million more adults would be living under the poverty line without Social Security according to research completed by the Center on Budget and Policy Priorities.[2]

Inside this article

  1. How does Social Security work?
  2. How the money is used
  3. Types of Social Security benefit
  4. Future of Social Security

How does Social Security work?

Let’s dig into how Social Security works and its tenuous future.

How people pay into Social Security

For individuals with W-2 employment (basically, full-time jobs), 6.2% out of every paycheck they receive for their first $147,000 in earnings is withheld for Social Security payments, with their employer paying in an additional 6.2%.[3] For self employed individuals, they must pay 12.4% of their net earnings from self-employment into Social Security.[4]

How Social Security uses the money

When Social Security receives money from people who are paying into the system, that money becomes pooled and is used to pay out monthly benefits to individuals who are currently receiving Social Security benefits. Any money leftover gets put into the Social Security trust fund to pay benefits to future generations.[5]

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How people get money from Social Security

People get money out of Social Security by becoming eligible for benefits. The most common ways individuals become eligible include:

  • Turning 62

  • Becoming disabled

  • Becoming a widow(er)

  • Being a minor child whose parent has passed away

  • Being an eligible dependent of someone receiving retirement or disability benefits

In addition, to qualify for benefits you must have worked and paid into the system for 40 quarters. The amount to equal a “quarter” has increased over time, in 2022 the amount is $1,510 per quarter, meaning anyone earning at least $6,040 in 2022 will have four quarters of social security earnings to count towards the 40 they need.


Since 1978, you can earn up to a maximum of four credits per year. Credits are based on your total wages and self-employment income for the year. You might work all year to earn four credits, or you might earn enough for all four in much less time.

It’s possible to qualify for disability without 40 quarters, but you must have 20 quarters over the 10 years prior to the date your disability began, with special requirements for people under 31 years of age.[6]

You can easily see your earnings history, including your personal eligibility for retirement or disability benefits online, including the amount you and your dependents are eligible for, by setting up a My Social Security account at socialsecurity.gov.

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Types of Social Security benefits


Retirement benefits are available starting at age 62 for a reduced amount, with the full amount available between age 66 and 67 depending on the year you were born, and an increased benefit for those who wait until age 70.

Retirement benefits are also available to dependents referred to as auxiliaries. These include spouses and dependent children under 18 or adult children who became disabled before the age of 22. Eligible spouses include anyone who is currently married to you, and anyone you were previously married to for at least 10 years who is currently single. They must be at retirement age themselves or caring for a child under the age of 16 to qualify.[7]

The amount your dependents get doesn’t affect your own benefits in any way, but they will only collect as a spouse if 50% of your benefit is greater than they can get on their own Social Security Benefits.[8]

Survivor’s benefits

Survivor’s benefits are available for children under the age of 18 or adult children disabled before the age of 22 after a parent has passed away. Widow(er)s can qualify for a survivor’s benefit at their full retirement age (66-67 depending on the year they were born), or for a reduced amount at 60. Disabled widow(er)s benefits may be eligible starting as young as age 50 and with a disability that started within seven years of their spouse’s passing.[9]


Supplemental Security Income (SSI)

Despite being administered by the Social Security Administration and having the word “Security” in it, SSI is not Social Security. SSI is a needs-based welfare program for low income individuals with limited resources who haven’t paid enough into Social Security to qualify for benefits. As of 2022, the monthly SSI amount for a single individual with no other income is $841 with some states providing a supplementary payment.[10] The funding for SSI does not come from OASDI payroll deductions or the Social Security trust fund but from the general tax pool.[11]

Disability benefits

Disability benefits are available to individuals who have a condition that is expected to permanently prevent them from doing any job or end in their passing. If an individual is approved for disability benefits, their dependents can be eligible for benefits as auxiliaries.

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Future of Social Security

Without any changes to the program, the Social Security Board of Trustees projects that only 80% of benefits will be payable after 2035. The single greatest reason for this is that as a whole our society is aging, with a much greater portion of individuals receiving benefits than people paying into the system after decades of declining birth rates.[12]

The Board of Trustees has suggested multiple ways to solve these issues, including increasing the payroll tax from 12.4% to 14.4%, reducing benefits by 13% immediately, or by combining a raise in taxes with a cut to benefits. Other options include eliminating the payroll tax ceiling of $147,000.[13]

While there are multiple proposals from prominent politicians including privatizing Social Security or replacing it with a universal basic income, nothing has been passed that makes a meaningful change to increasing the future solvency of this program that millions depend on to keep a roof over their heads and food on their tables.

Article Sources
  1. “What is Social Security?”Social Security Administration. https://www.ssa.gov/people/materials/pdfs/EN-05-10230.pdf
  2. “Social Security Lifts More People Above the Poverty Line Than any Other Program.” Center on Budget and Policy Priorities. April 19, 2022. https://www.cbpp.org/research/social-security/social-security-lifts-more-people-above-the-poverty-line-than-any-other
  3. “Contribution and Benefit Base.” Social Security Administration. https://www.ssa.gov/oact/cola/cbb.html
  4. “SI 00820.200 Net Earnings from Self-Employment (NESE).” Social Security Administration. https://secure.ssa.gov/poms.nsf/lnx/0500820200
  5. “Learn About Retirement Benefits.” Social Security Administration. https://www.ssa.gov/benefits/retirement/learn.html
  6. “Social Security Credits.” Social Security Administration. https://www.ssa.gov/benefits/retirement/planner/credits.html
  7. “Types of Beneficiaries.” Social Security Administration. https://www.ssa.gov/oact/progdata/types.html
  8. “Women, Marriage, and Social Security Benefits Revisited.” Social Security Administration. 2007. https://www.ssa.gov/policy/docs/ssb/v67n4/67n4p1.html
  9. “DI 10110.001 Requirements for Disabled Widow(er)’s Benefits (DWB).” Social Security Administration. https://secure.ssa.gov/poms.nsf/lnx/0410110001
  10. “SSI Federal Payment Amounts for 2022.” Social Security Administration. https://www.ssa.gov/oact/cola/SSI.html
  11. “Understanding Supplemental Security Income (SSI) Overview –2022 Edition.” Social Security Administration. https://www.ssa.gov/ssi/text-over-ussi.html
  12. “Summary: Actuarial Status of the Social Security Trust Funds.” Social Security Administration. June 2022. https://www.ssa.gov/policy/trust-funds-summary.pdf
  13. “The Future Financial Status of the Social Security Program.” Social Security. 2010. https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html

About the Author

Rae Hartley Beck

Rae Hartley Beck

Rae got her start writing in finance with a column for her college newspaper. Her work has since appeared on Investopedia, Bankrate and other financial news outlets. Rae worked for the Social Security Administration from 2016 to 2022 starting as a jack-of-all trades, and finishing her career as a claims specialist.

Full bio

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