Updated May 7, 2020
Social Security Overview
Social Security provides monthly cash benefits to retired or
before 1984 who are covered by the Civil Service
disabled workers and their family members, as well as to
Retirement System (CSRS).
the family members of deceased workers. It is one of the
federal government’s largest programs, both in terms of the
Who Qualifies for Benefits?
number of people affected (workers and beneficiaries) and
Social Security benefits are payable to retired or disabled
its finances. People of all ages are affected by the program,
workers who meet the minimum insured requirements,
including 178 million covered workers and about 64.5
among other factors. In general, 10 years of covered
million beneficiaries (of whom 4.1 million are children). In
employment are needed to qualify for retired-worker
2019, the program had total income of $1,062 billion
benefits. The number of years of coverage to be insured in
(92.4% from dedicated tax revenues) and total expenditures
the event of disability or death varies by age, from 1½ years
of $1,059 billion (98.9% for benefit payments). Currently,
for the youngest workers to 10 years for older workers. In
the Social Security trust funds hold about $2.9 trillion in
general, disabled workers must have worked for 5 of the
U.S. Treasury securities—asset reserves that are available
past 10 years immediately before the onset of disability.
for future program spending. Over the long term, however,
Social Security is projected to be unable to pay full benefits
Key Points on Social Security
scheduled under current law beginning in 2035. At that
point, the asset reserves held by the trust funds are
178 mil ion covered workers (and their employers) pay into
projected to be depleted, and the program’s tax income is
the system.
projected to cover about three-fourths of scheduled benefit
Over 64 mil ion beneficiaries receive monthly cash benefits,
payments through the end of the projection period (2094).
including retired workers, disabled workers, spouses,
These projections are made under the Board of Trustees’
children, and widow(er)s.
intermediate assumptions in the 2020 annual report; the
It is a self-financing program, with 92.4% of its total income
2020 report reflects the trustees’ understanding of Social
from dedicated tax revenues.
Security at the start of 2020 and does not include potential
Over its 85-year history, the program has col ected $23.0
effects of the Coronavirus Disease 2019 (COVID-19).
tril ion and paid out $20.1 tril ion, leaving trust fund asset
How Is Social Security Financed?
reserves of about $2.9 tril ion.
Social Security, authorized under Title II of the Social
It is projected to be unable to pay ful benefits starting in
2035, largely due to demographic factors.
Security Act, is a self-financing program with most of its
income derived from dedicated payroll tax contributions
Another eligibility factor is age. For example, a worker can
(89.0%). The program also receives income from the
claim retired-worker benefits as early as age 62. However,
federal income taxes that some beneficiaries pay on a
benefits claimed before the full retirement age (FRA) are
portion of their benefits (3.4%), interest income on asset
reduced to take into account the longer expected period of
reserves held by the Social Security trust funds (7.6%), and
benefit receipt. (The FRA ranges from 65 to 67, depending
a small amount (less than 1%) of other income (including
on the worker’s year of birth.) Similarly, a worker may
reimbursements from the General Fund of the Treasury).
delay claiming retired-worker benefits until after the FRA;
in this case, benefits are increased (up to age 70) to take
Workers who are covered by Social Security (93% of all
into account the shorter expected period of benefit receipt.
workers in 2020) and their employers must pay Social
Adjustments for early or delayed retirement are intended to
Security payroll taxes. The payroll tax rate is 12.4%,
provide the worker with the same total lifetime benefits
divided evenly between the worker and the employer (each
(based on average life expectancy).
pays 6.2%). The payroll tax is applied to the worker’s
earnings in covered employment, up to an annual limit (the
Benefits are also payable to the family members of retired,
taxable maximum). The taxable maximum is adjusted each
disabled, or deceased workers. Eligible family members
year based on average wage growth. The payroll tax is
include spouses, divorced spouses, widow(er)s, dependent
applied to earnings up to $137,700 in 2020. A worker’s
children, and dependent parents. The benefit amount
earnings above the taxable maximum are not subject to the
payable to a family member is based on the type of benefit
Social Security payroll tax, and they are not counted in the
worker’s benefit computation.
and the worker’s basic benefit amount (before any
adjustments are made). For example, spouses receive up to
50% of the worker’s basic benefit amount; widow(er)s
Among workers who are not covered by Social Security
receive up to 100% of the worker’s basic benefit amount.
(7% of all workers), the largest groups consist of some state
There is an overall limit on the amount of benefits payable
and local government employees who participate in
on a worker’s record. If total benefits payable to the worker
alternative pension plans and federal employees hired
and family members exceed the maximum, benefits for
each family member (excluding the worker) are reduced on
https://crsreports.congress.gov
Social Security Overview
a proportional basis. Other adjustments may be made to the
Spouses of retired workers
2.4 mil ion
family member’s benefit, based on the person’s age when
Children of retired workers
0.7 mil ion
claiming benefits, whether the person receives a Social
Disabled workers
8.3 mil ion
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
1.4 mil ion
Survivors of deceased workers
5.9 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 2020.
low career-average earnings.
Retired workers
$1,509
Spouses of retired workers
$787
The benefit computation process includes several steps.
Children of retired workers
$715
First, the worker’s earnings (up to the taxable maximum)
Disabled workers
$1,259
are indexed to average wage growth; indexing brings
Spouses of disabled workers
$361
nominal earnings up to near-current wage levels. The
Children of disabled workers
$392
highest 35 years of earnings are selected and summed; the
Survivors of deceased workers
$1,220
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 about $2.9
are applied to three segments of the worker’s AIME. The
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 three-
The PIA is the initial monthly benefit payable to the worker
fourths of benefit payments each year going forward. Over
at the full retirement age. It is also used to determine the
a 75-year 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 2020, there are over 64 million Social Security
beneficiaries. The largest group is retired workers (71%),
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
.5.5 mil ion
https://crsreports.congress.gov
Social Security Overview
IF10426
Barry F. Huston, Analyst in Social Policy
Disclaimer
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https://crsreports.congress.gov | IF10426 · VERSION 13 · UPDATED