Updated June 13, 2018
Social Security Overview
Social Security provides monthly cash benefits to retired or
among other factors. In general, 10 years of covered
disabled workers and their family members, as well as to
employment are needed to qualify for retired-worker
the family members of deceased workers. It is one of the
benefits. The number of years of coverage to be insured in
federal government’s largest programs, both in terms of the
the event of disability or death varies by age, from 1½ years
number of people affected (workers and beneficiaries) and
for the youngest workers to 10 years for older workers. In
its finances. People of all ages are affected by the program,
general, disabled workers must have worked for 5 of the
including 174 million covered workers and 62 million
past 10 years immediately before the onset of disability.
beneficiaries (of whom 4.2 million are children). In 2017,
the program had total income of $997 billion (91.5% from
Key Points on Social Security
dedicated tax revenues) and total expenditures of $952
billion (99% for benefit payments). Currently, the Social
174 mil ion covered workers (and their employers) pay into
Security trust funds hold more than $2.89 trillion in U.S.
the system.
Treasury securities—asset reserves that are available for
62 mil ion beneficiaries receive monthly cash benefits,
future program spending. Over the long term, however,
including retired workers, disabled workers, spouses,
Social Security is projected to be unable to pay full benefits
children, and widow(er)s.
scheduled under current law beginning in 2034. At that
It is a self-financing program, with 91.5% of its total income
point, the asset reserves held by the trust funds are
from dedicated tax revenues.
projected to be depleted, and the program’s tax income is
Over its 83-year history, the program has col ected $20.9
projected to cover about three-fourths of scheduled benefit
tril ion and paid out $18 tril ion, leaving trust fund asset
payments through the end of the projection period (2092).
reserves of more than $2.9 tril ion.
How Is Social Security Financed?
It is projected to be unable to pay ful benefits starting in
2034, largely due to demographic factors.
Social Security, authorized under Title II of the Social
Security Act, is a self-financing program with most of its
Another eligibility factor is age. For example, a worker can
income derived from dedicated payroll tax contributions
claim retired-worker benefits as early as age 62. However,
(87.7%). The program also receives income from the
benefits claimed before the full retirement age (FRA) are
federal income taxes that some beneficiaries pay on a
reduced to take into account the longer expected period of
portion of their benefits (3.8%), interest income on asset
benefit receipt. (The FRA ranges from 65 to 67, depending
reserves held by the Social Security trust funds (8.5%), and
on the worker’s year of birth.) Similarly, a worker may
a small amount (less than 1%) of other income (including
delay claiming retired-worker benefits until after the FRA;
reimbursements from the General Fund of the Treasury).
in this case, benefits are increased (up to age 70) to take
into account the shorter expected period of benefit receipt.
Workers who are covered by Social Security (94% of all
Adjustments for early or delayed retirement are intended to
workers) and their employers must pay Social Security
provide the worker with the same total lifetime benefits
payroll taxes. The payroll tax rate is 12.4%, divided evenly
(based on average life expectancy).
between the worker and the employer (each pays 6.2%).
The payroll tax is applied to the worker’s earnings in
Benefits are also payable to the family members of retired,
covered employment, up to an annual limit (the taxable
disabled, or deceased workers. Eligible family members
maximum). The taxable maximum is adjusted each year
include spouses, divorced spouses, widow(er)s, dependent
based on average wage growth. The payroll tax is applied to
children, and dependent parents. The benefit amount
earnings up to $128,400 in 2018 and up to $132,300 in
payable to a family member is based on the type of benefit
2019. A worker’s earnings above the taxable maximum are
and the worker’s basic benefit amount (before any
not subject to the Social Security payroll tax, and they are
not counted in the worker’s benefit computation.
adjustments are made). For example, spouses receive up to
50% of the worker’s basic benefit amount; widow(er)s
receive up to 100% of the worker’s basic benefit amount.
Among workers who are not covered by Social Security
There is an overall limit on the amount of benefits payable
(6% of all workers), the largest groups consist of some state
on a worker’s record. If total benefits payable to the worker
and local government employees who participate in
and family members exceed the maximum, benefits for
alternative pension plans and federal employees hired
each family member (excluding the worker) are reduced on
before 1984 who are covered by the Civil Service
a proportional basis. Other adjustments may be made to the
Retirement System (CSRS).
family member’s benefit, based on the person’s age when
Who Qualifies for Benefits?
claiming benefits, whether the person receives a Social
Security benefit or a noncovered pension based on his or
Social Security benefits are payable to retired or disabled
her own work record, and other factors.
workers who meet the minimum insured requirements,
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Social Security Overview
How Are Benefits Computed?
Children of disabled workers
1.6 mil ion
Social Security benefits are designed to replace part of a
Survivors of deceased workers
6.0 mil ion
worker’s earnings from work. As such, the amount of a
How Much Do Beneficiaries Receive?
worker’s benefit is based on his or her career-average
Benefit amounts vary by individual based on a number of
earnings in covered employment (i.e., earnings up to the
factors, including an individual’s earnings history, the age
taxable maximum) and a progressive benefit formula that is
at which he or she claims benefits, and the type of benefit
intended to provide adequate benefit levels for workers with
(for example, a retired-worker benefit or a spousal benefit).
low career-average earnings.
The following statistics show average monthly benefit
amounts by category as of December 2017.
The benefit computation process includes several steps.
Retired workers
$1,404
First, the worker’s earnings (up to the taxable maximum)
Spouses of retired workers
$732
are indexed to average wage growth; indexing brings
Children of retired workers
$675
nominal earnings up to near-current wage levels. The
Disabled workers
$1,196
highest 35 years of earnings are selected and summed; the
Spouses of disabled workers $335
total is divided by 420 months (35 years x 12 months). The
result is the worker’s
Children of disabled workers $366
Average Indexed Monthly Earnings
Survivors of deceased workers $1,151
(AIME). If a worker has fewer than 35 years of earnings in
covered employment, years with no earnings are entered as
What Is Social Security’s Status?
zeros, resulting in a lower AIME. (Note: In the case of a
disabled-worker benefit, fewer than 35 years of earnings
For many years, Social Security collected more revenues
may be used in the computation.)
than needed to pay benefits, resulting in accumulated assets
(interest-bearing U.S. Treasury securities) held by the trust
Next, the Social Security benefit formula is applied to the
funds available for future spending on Social Security.
worker’s AIME. The benefit formula has three parts—with
Today, as Social Security collects less revenue than needed
three different formula factors (90%, 32%, and 15%)—that
to pay benefits, it draws upon those asset reserves to meet
are applied to three segments of the worker’s AIME. The
its expenditures. Projections by the Social Security Board
result is the worker’s Primary Insurance Amount (PIA).
of Trustees show that Social Security will draw down more
The PIA is the initial monthly benefit payable to the worker
than $2.9 trillion in asset reserves by 2034. At that point,
at the full retirement age. It is also used to determine the
the program’s tax income is projected to cover about three-
amount of benefits payable to family members based on the
fourths of benefit payments each year going forward. Over
worker’s record (i.e., benefits for family members are equal
a 75-year projection period, on average, Social Security’s
to a specified percentage of the worker’s PIA).
expenditures are projected to exceed its income by about
20%. Demographic factors, such as lower fertility rates and
The benefit computation process, including the progressive
increasing longevity, contribute in large part to Social
Security’s pro
three-part benefit formula, results in
jected funding imbalance. Together, they
contribute to a decline in the number of workers paying into
benefits that replace a certain share of a worker’s career-
the system relative to the number of beneficiaries. Other
average earnings in covered employment;
contributing factors include program design features, such
a higher benefit (dollar amount) for workers with higher
as wage-indexing in the benefit computation process.
career-average earnings; and
The program’s projected financial outlook has prompted
a higher replacement rate for workers with lower
career-average earnings (initial monthly benefits replace
discussion among policymakers about changes to Social
a greater share of the worker’s preretirement earnings).
Security, with the policy debate reflecting a variety of
objectives and approaches to reform. For example, the
Adjustments may be made to the worker’s PIA based on
Social Security debate reflects efforts to scale back the
a number of factors, including the age at which the
program in response to Social Security’s projected funding
worker claims benefits. Unlike many other sources of
shortfalls, growing federal budget deficits, and other
retirement income, Social Security benefits are adjusted
concerns. In general, such proposals include a combination
for inflation through annual cost-of-living adjustments.
of revenue increases and benefit reductions. The Social
Security debate also reflects a shift in focus among some
Who Is Receiving Benefits?
policymakers toward proposals that would expand Social
As of December 2017, there are 62 million Social Security
Security benefits to address concerns about the adequacy of
beneficiaries. The largest group is retired workers (69%),
benefits and, more broadly, retirement income security.
followed by disabled workers (14%). Family members of
deceased workers make up 10% of the total, and family
For more information, see CRS Report R42035, Social
members of retired or disabled workers make up 8%.
Security Primer, and CRS Report R44948, Social Security
Retired workers
42.4 mil ion
Disability Insurance (SSDI) and Supplemental Security
Income (SSI): Eligibility, Benefits, and Financing.
Spouses of retired workers
2.4 mil ion
Children of retired workers
0.7 mil ion
Disabled workers
8.7 mil ion
Barry F. Huston, Analyst in Social Policy
Spouses of disabled workers
0.1 mil ion
IF10426
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Social Security Overview
Disclaimer
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