Updated September 3, 2021
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 about 65 million
the event of disability or death varies by age, from 1½ years
beneficiaries (of whom 3.9 million are children) in 2021. In
for the youngest workers to 10 years for older workers. In
2020, the program had total income of $1,118.1 billion
general, disabled workers must have worked for 5 of the
(93.2% from dedicated tax revenues) and total expenditures
past 10 years immediately before the onset of disability.
of $1,107.2 billion (99.0% for benefit payments). Currently,
the Social Security trust funds hold about $2.9 trillion in
Key Points on Social Security
U.S. Treasury securities—asset reserves that are available
for future program spending. Over the long term, however,
176 mil ion covered workers (and their employers) pay into
Social Security is projected to be unable to pay full benefits
the system.
scheduled under current law beginning in 2034. At that
Over 65 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 93.2% of its total income
payments through the end of the projection period (2095).
from dedicated tax revenues.
These projections are made under the Board of Trustees’
Over its 86-year history, the program has col ected $24.1
intermediate assumptions in the 2021 annual report; the
tril ion and paid out $21.2 tril ion, leaving trust fund asset
2021 report reflects the trustees’ understanding of Social
reserves of about $2.9 tril ion.
Security at the start of 2021.
It is projected to be unable to pay ful benefits starting in
How Is Social Security Financed?
2034, largely due to demographic factors.
Social Security, authorized under Title II of the Social
Another eligibility factor is age. For example, a worker can
Security Act, is a self-financing program with most of its
claim retired-worker benefits as early as age 62. However,
income derived from dedicated payroll tax contributions
benefits claimed before the full retirement age (FRA) are
(89.6%). The program also receives income from the
reduced to take into account the longer expected period of
federal income taxes that some beneficiaries pay on a
benefit receipt. (The FRA ranges from 65 to 67, depending
portion of their benefits (3.6%), interest income on asset
on the worker’s year of birth.) Similarly, a worker may
reserves held by the Social Security trust funds (6.8%), and
delay claiming retired-worker benefits until after the FRA;
a small amount (less than 1%) of other income (including
in this case, benefits are increased (up to age 70) to take
reimbursements from the General Fund of the Treasury).
into account the shorter expected period of benefit receipt.
Adjustments for early or delayed retirement are intended to
Workers who are covered by Social Security (94% of all
provide the worker with the same total lifetime benefits
workers in 2021) and their employers must pay Social
(based on average life expectancy).
Security payroll taxes. The payroll tax rate is 12.4%,
divided evenly between the worker and the employer (each
Benefits are also payable to the family members of retired,
pays 6.2%). The payroll tax is applied to the worker’s
disabled, or deceased workers. Eligible family members
earnings in covered employment, up to an annual limit (the
include spouses, divorced spouses, widow(er)s, dependent
taxable maximum). The taxable maximum is adjusted each
children, and dependent parents. The benefit amount
year based on average wage growth. The payroll tax is
payable to a family member is based on the type of benefit
applied to earnings up to $142,800 in 2021. A worker’s
and the worker’s basic benefit amount (before any
earnings above the taxable maximum are not subject to the
adjustments are made). For example, spouses receive up to
Social Security payroll tax, and they are not counted in the
worker’s benefit computation.
50% of the worker’s basic benefit amount; widow(er)s
receive up to 100% of the worker’s basic benefit amount.
There is an overall limit on the amount of benefits payable
Among workers who are not covered by Social Security
on a worker’s record. If total benefits payable to the worker
(6% of all workers), the largest groups consist of some state
and family members exceed the maximum, benefits for
and local government employees who participate in
each family member (excluding the worker) are reduced on
alternative pension plans and federal employees hired
a proportional basis . Other adjustments may be made to the
before 1984 who are covered by the Civil Service
family member’s benefit, based on the person’s age when
Retirement System (CSRS).
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
Children of retired workers
0.7 mil ion
her own work record, and other factors.
Disabled workers
8.0 mil ion
Spouses of disabled workers
0.1 mil ion
How Are Benefits Computed?
Children of disabled workers
1.3 mil ion
Social Security benefits are designed to replace part of a
Survivors of deceased workers
5.8 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 July 2021.
The benefit computation process includes several steps.
First, the worker’s earnings (up to the taxable maximum)
Retired workers
$1,557
are indexed to average wage growth; indexing brings
Spouses of retired workers
$795
nominal earnings up to near-current wage levels. The
Children of retired workers
$734
highest 35 years of earnings are selected and summed; the
Disabled workers
$1,281
total is divided by 420 months (35 years x 12 months). The
Spouses of disabled workers
$359
result is the worker’s Average Indexed Monthly Earnings
Children of disabled workers
$400
(AIME). If a worker has fewer than 35 years of earnings in
Survivors of deceased workers
$1,249
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. The Social Security Board of Trustees
result is the worker’s Primary Insurance Amount (PIA).
projects that Social Security will draw down about $2.9
The PIA is the initial monthly benefit payable to the worker
trillion in asset reserves by 2034. At that point, the
at the full retirement age. It is also used to determine 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
23%. Demographic factors, such as lower fertility rates and
The benefit computation process, including the progressive
increasing longevity, contribute in large part to Social
three-part benefit formula, results in
Security’s projected 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
discussion among policymakers about changes to Social
career-average earnings (initial monthly benefits replace
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 August 2021, there are over 65 million Social
Security benefits to address concerns about the adequacy of
Security beneficiaries . The largest group is retired workers
benefits and, more broadly, retirement income security.
(72.1%), followed by disabled workers (12.4%). Family
members of deceased workers make up 9.0% of the total,
For more information, see CRS Report R42035, Social
and family members of retired or disabled workers make up
Security Primer.
6.6%.
Retired workers
46.9 mil ion
Barry F. Huston, Analyst in Social Policy
Spouses of retired workers
2.2 mil ion
IF10426
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Social Security Overview
Disclaimer
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https://crsreports.congress.gov | IF10426 · VERSION 14 · UPDATED