Personal Finance & Estate › Social Security
Social Security (OASDI)
Since 1935· Government program
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
The federal program that pays monthly retirement, disability and survivor benefits to workers and their families, funded mainly by payroll taxes.
See it on the Personal Finance & Estate map →How it works
Signed by Franklin Roosevelt in August 1935, with the first monthly checks in January 1940, Social Security (Old-Age, Survivors and Disability Insurance) now pays about 70 million people. Workers earn eligibility through payroll taxes; benefits depend on your top 35 years of earnings and the age you claim. Checks are adjusted for inflation each year. The average retired worker gets about $2,070 a month in 2026. Wages and self-employment income earn credits; rental and investment income do not.
Why it matters for you
For most retirees it is the only lifetime, inflation-adjusted income they have; about four in ten older beneficiaries get at least half their income from it.
Rules, limits and sources (2026)
The Social Security Act of 1935 and its amendments, SSA's Annual Statistical Supplement and the yearly Trustees Reports. Your own earnings record is at ssa.gov/myaccount; check it for errors.
Watch out for
How Congress will close the funding gap projected for the early 2030s (see the trust fund item) is unresolved.
Inside this (9)
- FICA & self-employment tax (Social Security & Medicare)
- Benefit formula: 40 credits, top 35 years, AIME & PIA
- Spousal benefit (incl. divorced spouses)
- Survivor benefit (widows & widowers)
- Trust fund depletion projection (~2033–34)
- Taxation of Social Security benefits (up to 85%)
- Cost-of-living adjustment (COLA)
- Social Security Disability Insurance (SSDI)
- Supplemental Security Income (SSI)
Connections (11)
▸FICA & self-employment tax (Social Security & Medicare) funds Social Security (OASDI)Law or rule (2026)
How they connect
The 12.4% Social Security share of FICA and self-employment tax, on earnings up to $184,500 in 2026, supplies about nine-tenths of the program's income. Paying it also earns the credits that make you eligible. Today's taxes mostly pay today's retirees.
When it applies
Collections began in 1937 at 1% each from worker and employer on the first $3,000 of wages; later laws, mainly in 1977 and 1983, raised the rate and wage base.
The rule
Each Trustees Report itemizes the year's income by source: payroll taxes, income taxes on benefits and interest on reserves.
Watch out for
Whether to raise the rate, lift the wage cap, or add other revenue for Social Security is the central funding debate.
▸Benefit formula: 40 credits, top 35 years, AIME & PIA sets each check in Social Security (OASDI)Law or rule (2026)
How they connect
The formula turns your earnings record into your primary insurance amount (PIA), the base for every check paid on your record: your own, your spouse's, your survivors' and disability payments. Claiming age then scales that base up or down.
When it applies
Adopted in the Social Security Amendments of 1977, signed by Jimmy Carter, and applied to workers turning 62 from 1979 on.
The rule
Section 215 of the Social Security Act defines it; SSA's online calculators and your Statement apply it to your own record.
Watch out for
Whether 35 years is the right averaging span, and whether the top tier should shrink for high earners, are standing reform questions.
▸Spousal benefit (incl. divorced spouses) is a family benefit of Social Security (OASDI)Law or rule (2026)
How they connect
The spousal benefit lets a spouse or qualifying ex draw up to half the worker's full benefit from the same earnings record, without reducing the worker's own check. It turns Social Security from a personal pension into household coverage.
When it applies
Added in 1939 for wives; later laws and 1970s Supreme Court rulings extended it equally to husbands.
The rule
Section 202 of the Social Security Act and SSA's benefit statistics document the rules and the number of people receiving it.
Watch out for
Because more women now have their own work records, fewer rely on spousal benefits; whether the 50% design still fits modern families is debated.
▸Survivor benefit (widows & widowers) is a family benefit of Social Security (OASDI)Law or rule (2026)
How they connect
Survivor benefits let a widow, widower, young children or a qualifying ex keep receiving payments based on the deceased worker's record, making Social Security a form of family life insurance as well as a pension.
When it applies
Created by the 1939 amendments, before the first monthly retirement checks went out in 1940; widowers gained equal treatment after 1970s court rulings.
The rule
SSA's program rules and monthly statistics show millions of widows, widowers and children receiving benefits; your Statement estimates your family's amounts.
Watch out for
A cut after trust-fund depletion would hit survivors too, often older widows with few other resources; whether Congress would shield them is unknown.
▸Trust fund depletion projection (~2033–34) threatens full benefits from Social Security (OASDI)Watch out
How they connect
Reserves built up after the 1983 reform now cover the gap between tax income and benefit costs. Once they run out, around 2033–34, SSA can legally pay only what comes in, about 77–81% of scheduled benefits, unless Congress changes the law.
When it applies
Reserves peaked near $2.9 trillion around 2020 and have been drawn down since as baby boomers retire; SSA's Office of the Chief Actuary makes the projections.
How sure?
Annual Trustees Reports and CBO projections agree on the early-to-mid 2030s, though the exact year shifts with the economy and new laws.
Watch out for
Whether Congress acts early or at the last minute, and who bears any tax increases or benefit cuts, is undecided.
▸Taxation of Social Security benefits (up to 85%) taxes part of Social Security (OASDI)Law or rule (2026)
How they connect
Retirees with enough other income pay federal income tax on up to 85% of their benefits. That revenue flows back: tax on the first 50% tier goes to the Social Security trust funds, and the rest to Medicare's hospital fund.
When it applies
Recommended by the 1983 Greenspan Commission to shore up finances; the 1993 budget law added the 85% tier, effective 1994.
The rule
Trustees Reports list income from taxing benefits, around 4% of Social Security's yearly income.
Watch out for
SSA's actuaries say the 2025 senior deduction slightly reduces this revenue, pulling depletion a bit earlier; ending the tax entirely would widen the gap.
▸Cost-of-living adjustment (COLA) raises benefits from Social Security (OASDI)Law or rule (2026)
How they connect
Each January the COLA raises every Social Security and SSI check by the same percentage, 2.8% for 2026, so the buying power of benefits holds roughly steady for life.
When it applies
Congress passed occasional raises until the 1972 amendments made them automatic starting in 1975; SSA announces the figure each October.
The rule
SSA's published COLA history shows every adjustment since 1975, matched to Bureau of Labor Statistics CPI-W data.
Watch out for
Rising Medicare premiums can absorb much of a small COLA; proposals to switch to the chained CPI (lower) or CPI-E (higher) remain unresolved.
▸Social Security Disability Insurance (SSDI) is the disability arm of Social Security (OASDI)Law or rule (2026)
How they connect
SSDI pays a disabled worker's full, unreduced benefit before retirement age, from the same earnings record and payroll taxes but through its own trust fund. At full retirement age it converts automatically into a retirement benefit.
When it applies
Created in 1956 under President Eisenhower for workers aged 50–64; the age floor was removed in 1960.
The rule
The separate Disability Insurance trust fund appears in each Trustees Report; the 2025 report projects it solvent for the full 75 years.
Watch out for
Applications have fallen since about 2010; researchers debate how much reflects a stronger job market, stricter reviews or slower processing.
▸Supplemental Security Income (SSI) is the needs-based sibling of Social Security (OASDI)Law or rule (2026)
How they connect
SSI is run by the Social Security Administration and uses the same offices and disability rules, but it is a separate needs-based program paid from general taxes, not from work history. Many people receive both a small Social Security check and SSI.
When it applies
Created by the 1972 amendments and launched in January 1974, folding state programs for aged, blind and disabled people into one federal benefit.
The rule
Title XVI of the Social Security Act; SSA's annual SSI reports keep it separate from the payroll-funded trust funds.
Watch out for
Advocates and lawmakers debate whether asset limits and rules on family help are too strict, but changes have stalled.
▸Social Security (OASDI) is run by Social Security Administration (SSA)Law or rule (2026)
How they connect
Congress sets Social Security's rules and the payroll tax that funds it; SSA runs it day to day. It keeps your lifetime earnings record from W-2s and self-employment returns, computes benefits from it, processes claims and appeals, and pays about $1.5 trillion a year from trust funds held by the Treasury.
When it applies
The Social Security Board, created in 1935, became the Social Security Administration in 1946; it has been an independent agency since 1995.
The rule
The Social Security Act defines SSA's duties; the annual Trustees Report and SSA statistics document payments and earnings records.
Watch out for
Whether SSA's shrinking staff can handle record claims from retiring baby boomers without longer waits is a live concern in 2025–26.
▸Medicare Part B (doctors & outpatient) is usually paid by deduction from Social Security (OASDI)Law or rule (2026)
How they connect
If you collect Social Security, your Part B premium, any IRMAA and, if you choose, Part D premiums come straight out of the monthly check. A 'hold-harmless' rule stops a premium rise from cutting most people's net check below last year's, but not for new enrollees or IRMAA payers. Those not yet collecting are billed quarterly.
When it applies
In place since Medicare began in 1966; collecting Social Security at 65 also enrolls you in Parts A and B automatically.
The rule
Social Security Act Sec. 1840 (premium deduction) and Sec. 1839(f) (hold-harmless); SSA benefit notices show the deduction.
Watch out for
For 2026 the premium rose $17.90 a month, absorbing about a third of the average retiree's roughly $56 COLA raise; whether that squeeze continues is uncertain.