Updated May 1, 2019
Social Security Overview
Social Security provides monthly cash benefits to retired or
Who Qualifies for Benefits?
disabled workers and their family members, as well as to
Social Security benefits are payable to retired or disabled
the family members of deceased workers. It is one of the
workers who meet the minimum insured requirements,
federal government’s largest programs, both in terms of the
among other factors. In general, 10 years of covered
number of people affected (workers and beneficiaries) and
employment are needed to qualify for retired-worker
its finances. People of all ages are affected by the program,
benefits. The number of years of coverage to be insured in
including 176 million covered workers and 63 million
the event of disability or death varies by age, from 1½ years
beneficiaries (of whom 4.2 million are children). In 2018,
for the youngest workers to 10 years for older workers. In
the program had total income of $1,003 billion (91.7% from
general, disabled workers must have worked for 5 of the
dedicated tax revenues) and total expenditures of $1,000
past 10 years immediately before the onset of disability.
billion (98.8% for benefit payments). Currently, the Social
Security trust funds hold $2.9 trillion in U.S. Treasury
Key Points on Social Security
securities—asset reserves that are available for future
program spending. Over the long term, however, Social
176 mil ion covered workers (and their employers) pay into
Security is projected to be unable to pay full benefits
the system.
scheduled under current law beginning in 2035. At that
63 mil ion beneficiaries receive monthly cash benefits,
point, the asset reserves held by the trust funds are
including retired workers, disabled workers, spouses,
projected to be depleted, and the program’s tax income is
children, and widow(er)s.
projected to cover about three-fourths of scheduled benefit
It is a self-financing program, with 91.7% of its total income
payments through the end of the projection period (2093).
from dedicated tax revenues.
How Is Social Security Financed?
Over its 84-year history, the program has col ected $21.9
tril ion and paid out $19.0 tril ion, leaving trust fund asset
Social Security, authorized under Title II of the Social
reserves of more than $2.9 tril ion.
Security Act, is a self-financing program with most of its
income derived from dedicated payroll tax contributions
It is projected to be unable to pay ful benefits starting in
2035, largely due to demographic factors.
(88.2%). The program also receives income from the
federal income taxes that some beneficiaries pay on a
Another eligibility factor is age. For example, a worker can
portion of their benefits (3.5%), interest income on asset
claim retired-worker benefits as early as age 62. However,
reserves held by the Social Security trust funds (8.3%), and
benefits claimed before the full retirement age (FRA) are
a small amount (less than 1%) of other income (including
reduced to take into account the longer expected period of
reimbursements from the General Fund of the Treasury).
benefit receipt. (The FRA ranges from 65 to 67, depending
on the worker’s year of birth.) Similarly, a worker may
Workers who are covered by Social Security (93% of all
delay claiming retired-worker benefits until after the FRA;
workers) and their employers must pay Social Security
in this case, benefits are increased (up to age 70) to take
payroll taxes. The payroll tax rate is 12.4%, divided evenly
into account the shorter expected period of benefit receipt.
between the worker and the employer (each pays 6.2%).
The payroll tax is applied to the worker’s earnings
Adjustments for early or delayed retirement are intended to
in
provide the worker with the same total lifetime benefits
covered employment, up to an annual limit (the taxable
(based on average life expectancy).
maximum). The taxable maximum is adjusted each year
based on average wage growth. The payroll tax is applied to
Benefits are also payable to the family members of retired,
earnings up to $132,900 in 2019 and up to an estimated
disabled, or deceased workers. Eligible family members
$136,800 in 2020. A worker’s earnings above the taxable
include spouses, divorced spouses, widow(er)s, dependent
maximum are not subject to the Social Security payroll tax,
children, and dependent parents. The benefit amount
and they are not counted in the worker’s benefit
payable to a family member is based on the type of benefit
computation.
and the worker’s basic benefit amount (before any
adjustments are made). For example, spouses receive up to
Among workers who are not covered by Social Security
50% of the worker’s basic benefit amount; widow(er)s
(7% of all workers), the largest groups consist of some state
receive up to 100% of the worker’s basic benefit amount.
and local government employees who participate in
There is an overall limit on the amount of benefits payable
alternative pension plans and federal employees hired
on a worker’s record. If total benefits payable to the worker
before 1984 who are covered by the Civil Service
and family members exceed the maximum, benefits for
Retirement System (CSRS).
each family member (excluding the worker) are reduced on
a proportional basis. Other adjustments may be made to the
family member’s benefit, based on the person’s age when
claiming benefits, whether the person receives a Social
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Social Security Overview
Security benefit or a noncovered pension based on his or
Spouses of disabled workers
0.1 mil ion
her own work record, and other factors.
Children of disabled workers
1.5 mil ion
Survivors of deceased workers
6.0 mil ion
How Are Benefits Computed?
How Much Do Beneficiaries Receive?
Social Security benefits are designed to replace part of a
Benefit amounts vary by individual based on a number of
worker’s earnings from work. As such, the amount of a
factors, including an individual’s earnings history, the age
worker’s benefit is based on his or her career-average
at which he or she claims benefits, and the type of benefit
earnings in covered employment (i.e., earnings up to the
(for example, a retired-worker benefit or a spousal benefit).
taxable maximum) and a progressive benefit formula that is
The following statistics show average monthly benefit
intended to provide adequate benefit levels for workers with
amounts by category as of March 2019.
low career-average earnings.
Retired workers
$1,467
Spouses of retired workers
$766
The benefit computation process includes several steps.
Children of retired workers
$700
First, the worker’s earnings (up to the taxable maximum)
Disabled workers
$1,235
are indexed to average wage growth; indexing brings
Spouses of disabled workers $351
nominal earnings up to near-current wage levels. The
Children of disabled workers $383
highest 35 years of earnings are selected and summed; the
Survivors of deceased workers $1,193
total is divided by 420 months (35 years x 12 months). The
result is the worker’s Average Indexed Monthly Earnings
What Is Social Security’s Status?
(AIME). If a worker has fewer than 35 years of earnings in
covered employment, years with no earnings are entered as
For many years, Social Security collected more revenues
zeros, resulting in a lower AIME. (Note: In the case of a
than needed to pay benefits, resulting in accumulated assets
disabled-worker benefit, fewer than 35 years of earnings
(interest-bearing U.S. Treasury securities) held by the trust
may be used in the computation.)
funds available for future spending on Social Security.
Today, as Social Security collects less revenue than needed
Next, the Social Security benefit formula is applied to the
to pay benefits, it draws upon those asset reserves to meet
worker’s AIME. The benefit formula has three parts—with
its expenditures. The Social Security Board of Trustees
three different formula factors (90%, 32%, and 15%)—that
projects that Social Security will draw down more than
are applied to three segments of the worker’s AIME. The
$2.89 trillion in asset reserves by 2035. At that point, the
result is the worker’s Primary Insurance Amount (PIA).
program’s tax income is projected to cover about 80% of
The PIA is the initial monthly benefit payable to the worker
benefit payments each year going forward. Over a 75-year
at the full retirement age. It is also used to determine the
projection period, on average, Social Security’s
amount of benefits payable to family members based on the
expenditures are projected to exceed its income by about
worker’s record (i.e., benefits for family members are equal
20%. Demographic factors, such as lower fertility rates and
to a specified percentage of the worker’s PIA).
increasing longevity, contribute in large part to Social
Security’s projected funding imbalance. Together, they
The benefit computation process, including the progressive
contribute to a decline in the number of workers paying into
three-part benefit formula, results in
the system relative to the number of beneficiaries. Other
contributing factors include program design features, such
benefits that replace a certain share of a worker’s career-
as wage indexing in the benefit-computation process.
average earnings in covered employment;
a higher benefit (dollar amount) for workers with higher
The program’s projected financial outlook has prompted
career-average earnings; and
discussion among policymakers about changes to Social
Security, with the policy debate reflecting a variety of
a higher replacement rate for workers with lower
career-average earnings (initial monthly benefits replace
objectives and approaches to reform. For example, the
a greater share of the worker’s preretirement earnings).
Social Security debate reflects efforts to scale back the
program in response to Social Security’s projected funding
Adjustments may be made to the worker’s PIA based on
shortfalls, growing federal budget deficits, and other
a number of factors, including the age at which the
concerns. In general, such proposals include a combination
worker claims benefits. Unlike many other sources of
of revenue increases and benefit reductions. The Social
retirement income, Social Security benefits are adjusted
Security debate also reflects a shift in focus among some
for inflation through annual cost-of-living adjustments.
policymakers toward proposals that would expand Social
Security benefits to address concerns about the adequacy of
Who Is Receiving Benefits?
benefits and, more broadly, retirement income security.
As of March 2019, there are 63 million Social Security
beneficiaries. The largest group is retired workers (70%),
For more information, see CRS Report R42035, Social
followed by disabled workers (13%). Family members of
Security Primer, and CRS Report R44948, Social Security
deceased workers make up 9% of the total, and family
Disability Insurance (SSDI) and Supplemental Security
members of retired or disabled workers make up 7%.
Income (SSI): Eligibility, Benefits, and Financing.
Retired workers
44.1 mil ion
Spouses of retired workers
2.4 mil ion
Barry F. Huston, Analyst in Social Policy
Children of retired workers
0.7 mil ion
IF10426
Disabled workers
8.5 mil ion
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Social Security Overview
Disclaimer
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