Social Security is the largest and most enduring social insurance program in the United States.
Social Security is the largest and most enduring social insurance program in the United States. Established in 1935 during the Great Depression, the Social Security Act created a system to provide financial support to older Americans who could no longer work.
Over time, the program expanded to include benefits for disabled individuals, survivors of deceased workers, and the families of beneficiaries. Today, Social Security is the foundation of retirement security for most Americans, and it is broadly supported.
How Social Security Works
Social Security is primarily funded through payroll taxes collected under the Federal Insurance Contributions Act (FICA). Workers and employers each contribute 6.2% of wages (up to an annual wage cap), while the self-employed contribute the full 12.4%. These contributions flow into two trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund.
Social Security operates on a pay-as-you-go system, in which current workers’ contributions fund current retirees’ benefits. In return, workers earn “credits” toward their own future benefits. Typically, 40 credits (about 10 years of work) are required to qualify for retirement benefits.
When workers reach eligibility (currently age 62 for early retirement and age 67 for full retirement benefits for those born in 1960 or later), they can claim monthly benefits based on their earnings history. Benefits are adjusted for inflation annually through a cost-of-living adjustment (COLA), helping protect retirees’ purchasing power.
A Look Back at Social Security’s Financing
Social Security contribution rates were increased frequently in the program’s early years. Today, however, Social Security is still operating with contribution rates set in 1983. The 1983 reforms were successful at projecting where the country was heading economically and demographically, which produced four decades of predictable costs for both employers and workers.
Today, conversations about Social Security often are dominated by two ideas: the importance of the benefits to seniors and the upcoming financial challenges.
Both ideas are important given that:
50% of seniors rely on Social Security for half or more of their income.
Social Security will need action so benefits and revenues are kept in balance.
Quantifying the Economic Impact of Social Security Benefit Spending
New research from the National Institute on Retirement Security finds that Social Security benefits play a powerful role in supporting the U.S. economy, generating $2.6 trillion in total economic output and supporting more than 12 million American jobs in 2023.
Social Security at 90: A Bipartisan Roadmap for the Program’s Future
The National Academy of Social Insurance, AARP, the National Institute on Retirement Security, and the U.S. Chamber of Commerce have released a new report detailing American’s views of retirement, Social Security at 90: A Bipartisan Roadmap for the Program’s Future.
Social Security’s First 90 Years: A History of Bipartisan and Intergenerational Support
As Social Security approaches its 90th anniversary, a new report from the National Institute on Retirement Security finds that public support remains strong for Social Security, and Americans become more confident in Social Security as they age.
New Research Finds Social Security Has a Strong Economic Impact
New research from the National Institute on Retirement Security finds that Social Security benefits play a powerful role in supporting the U.S. economy.
A Birthday Gift for Social Security: Action Now Will Protect Benefits for the Next 90 Years
Happy birthday, Social Security! President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, establishing a program that would grow over 90 years to become the foundation of retirement security in the United States. As we celebrate the remarkable accomplishments of Social Security during this anniversary month, it’s also important […]
Statement on the 90th Anniversary of Social Security
To commemorate the program’s 90th anniversary, Dan Doonan, Executive Director, National Institute on Retirement Security, issued a statement on the importance of the program and the need for a bipartisan solution to address funding.
