Introduction to Social Security Retirement Benefits

Social Security was enacted in 1935 to provide some relief to America’s destitute older citizens during the economic cataclysm known as the Great Depression. A direct descendant of that more limited effort, today’s Social Security retirement program is in fact a group of related programs, each with its own eligibility and payment rules:

• retirement,
• disability,
• survivors, and
• dependents benefits.

Retirement Benefits

The best known of these programs is retirement, known formally as Old-Age and Survivors Insurance (OASI). Under this program, Social Security provides income to retirees, as well as benefits to a worker’s surviving spouse and to a retired worker’s children under age 18. As of January 2020, the program was issuing benefits to some 47 million retired workers and their dependents, as well as to more than 6 million survivors of deceased workers.

Social Security retirement benefits are financed primarily through dedicated payroll taxes paid by workers and their employers. The 15.3 percent payroll tax, known as Federal Income Contribution Act taxes (FICA), has two components: Social Security (12.4 percent) and Medicare (2.9 percent). Employees and employers split them both equally. For the Social Security portion, employers pay 6.2 percent of an employee’s income, and the employee kicks in the same. Self-employed individuals pay the entire 12.4 percent Social Security payroll tax. However, they may deduct half in figuring their adjusted gross income.

For most retired workers and their dependents, however, Social Security retirement benefits alone are not enough for them to maintain the standard of living they had before retirement. Although Social Security retirement benefits are protected against inflation by annual Cost of Living Adjustments, the estimated average retirement benefit for retirees is only about $1,907 a month (as of January 2024). Surviving spouse, full retirement age or older, will receive 100% of the benefit amount. Surviving spouse, age 60 to full retirement age will receive 71½ to 99% of the basic amount.