What is Social Security? Eligibility, benefits, and retirement age explained

Social Security is a government program funded by working people that pays retirees and disabled workers. It started during the Great Depression in the 1930s and is now a major source of income for many.

Although Social Security can be a big help for retirees and people with disabilities, it generally doesn't provide enough as a sole source of income. Therefore, retirement experts generally recommend contributing to one or multiple of the best retirement plans (including an IRA and 401k).

Here's everything you need to know about how Social Security works and about receiving Social Security benefits in 2025.

How does Social Security work?

How to define Social Security and its purpose

Social Security is a vital U.S. government program providing financial support for retirees, people with disabilities, and survivors of deceased family members. How much you've paid into the program determines how much you'll receive later.

Here's a Social Security simple definition: "To better understand Social Security, it may be helpful to know that the official name is the Old Age, Survivors, and Disability Insurance (OASDI) program," says Jay Zigmont, Founder and CEO of Childfree Wealth. "While OASDI may not be as catchy a term as Social Security, it does explain the program."

History and evolution of the Social Security program

The Civil War Pension program was the first unofficial Social Security program in the U.S. Starting in 1862, it began providing benefits to disabled veterans and survivors of deceased breadwinners directly affected by the war. In 1906, old age became another qualifier for this program.

The Social Security program as we know it today was started in 1935 by President Franklin D. Roosevelt in response to the economic struggles of the Great Depression. The Social Security Board was also formed during this time. Taxes began being collected in 1937, creating the Special Trust Fund. However, monthly payments did not begin until 1940.

President Eisenhower added a disability insurance program in 1954, but a cash benefit wasn't included until 1956. The Supplemental Security Income Program (SSI) was introduced in the 1970s. Since then, the Social Security program has undergone various reforms. Some of the most notable forms occurred during the Bush Administration (2001 to 2008) and the Obama Administration (2009 to 2017).

Similarly, under the current Trump Administration (2025), the Social Security Administration's overpayment recovery policy has been revised. As of April 2025, all overpayments are subject to a 50% withholding cap. Previously, the SSA could withhold 100% of future benefits until it recovered the overpayment amount in full.

You also have the option to repay the overpayments on your own, request a lower recovery rate, or request a waiver if you're not at fault for the overpayment, and repayment would cause you financial hardship.

How Social Security is funded

Social Security is funded through federal payroll taxes. If you collect a paycheck, your employer will withhold a portion of your earnings for Social Security. If you're self-employed, you'll pay these taxes yourself.

Throughout your career, you'll contribute a substantial portion of your income to the Social Security program. All that money is pooled together to support what has become a vast program that retirees, workers with disabilities, and their survivors rely on for economic security.

In 2025, the Social Security tax rate is the same as in 2024 and 2023: 6.2% for the employee, with an equal match by the employer, for a total of 12.4% applied to the first $176,100 of earnings.

Types of Social Security benefits: retirement, disability, survivors

While it's mostly associated with retirement, Social Security also provides disability and survivor benefits. All these programs are run by the Social Security Administration (SSA).

Social Security retirement benefits

Social Security retirement benefits are monthly checks that supplement income for retirees. Regardless of how much you earn or when you retire, you should never rely on Social Security as your sole source of income in retirement. It almost certainly will not be enough.

Be sure to include others, such as a 401(k) or IRA, in planning for your life after work. Many financial professionals recommend that you aim to have between 70% and 80% of your pre-retirement income each year in retirement.

Social Security disability benefits

Disability benefits are for individuals who are unable to work due to a chronic physical or mental condition. There are two different programs for disability benefits:

• Social Security Disability Insurance (SSDI): This program benefits you and certain family members if you are "insured," meaning you worked long (or recently) enough and paid Social Security taxes on your earnings.
• Supplemental Security Income (SSI): This program pays benefits to adults and children with disabilities who have limited income and resources.

Remember, this is not a short-term disability program like workers' compensation, insurance, or a savings account.

For every $1 that goes toward Social Security, $0.85 goes to a trust fund that pays the monthly benefits to everyone who currently files for Social Security. The other $0.15 goes to a trust fund that pays benefits to people with disabilities and their families.

Social Security survivors' benefits

Under certain conditions, your family can receive Social Security benefits based on your years of work after you die. If you find yourself in a survivor's situation, you can use the Social Security program to help offset lost income due to a family member passing away.

Survivors' payments are based on a percentage of the deceased family member's basic Social Security benefit, which usually ranges from 75% to 100%.

Eligibility for Social Security benefits

A major part of understanding Social Security is learning who is eligible for benefits and who isn't. This will help you determine whether or not you qualify for Social Security now, whether you will in the future, or never will.

Identity verification

The Social Security Administration has implemented new identity verification rules. While the program initially required most applicants to verify their identity in person for phone applications or account changes, the policy was revised in April 2025.

To change your direct deposit, go to ssa.gov/PIN to get a special one-time code that you will need to share with the Social Security representative when you call 1-800-772-1213. When you go to the website, you will be redirected to log in to or create a personal My Social Security account to generate the one-time code.

However, if you are unable to create an account online, you will need to come into a local Social Security office or arrange for direct deposit through your bank.

How to qualify for Social Security retirement benefits

To be eligible for Social Security retirement benefits, you must meet the following criteria:

• At least 62 years old
• Worked and paid Social Security taxes for at least 10 years
• Earn at least 40 Social Security credits

You earn "credits" each year you work and pay Social Security tax. The maximum number of credits you can earn each year is four. Forty credits equal around 10 years of work.

In 2025, you earn one credit for every $1,810 in covered earnings each year. To earn four credits in a year, you must earn at least $7,240.

How to qualify for Social Security disability benefits

To qualify for Social Security disability benefits, you must meet criteria including:

• You are unable to work in the future because of your medical condition.
• You cannot do the work you did previously or adjust to other work due to a recent diagnosis of a medical condition.
• Your condition has lasted at least a year or will result in your death.

How to qualify for Social Security survivor benefits

For surviving spouses, the criteria to receive payments are:

• Age 60 or older
• Age 50 or older with a qualifying disability
• Did not remarry before age 60 (age 50 with a qualifying disability)
• Any age if caring for a child who is younger than 16 or has a qualifying disability

For your children to receive Social Security benefits, the criteria include the following:

• Unmarried
• Younger than 17 years old
• Between 18 and 19 years old, but in a secondary school as a full-time student
• Age 21 or younger with a qualifying disability

Social Security age requirements

Age is an important factor to discuss when it comes to understanding how Social Security works. Below is a description and an explanation of the age requirements to qualify for Social Security benefits.

Early retirement age

You can start receiving Social Security retirement benefits as early as 62, but you won't be able to access your full benefits until you reach the full retirement age (see the chart below). Age 62 is considered an "early retirement," and your benefits will be reduced by nearly 30% until you reach full retirement age.

The maximum Social Security benefit you can earn at 62 is $2,831 monthly in 2025.

Full retirement age (FRA)

Full retirement age refers to the age at which you can receive full Social Security retirement benefits. However, the full retirement age isn't the same for everyone, as it varies by birth year.

For example, the full retirement age is 67 for folks born in the 1960s or later. However, those born between 1943 and 1959 can reach full retirement age between 66 and 67.

In 2025, the maximum benefit you can receive at full retirement age is $4,018. If you retire at age 70, you can earn the maximum benefit of $5,108.

Delayed retirement credits

Each month you delay starting Social Security benefits after you reach full retirement age (67), your benefits increase by 1%. Your benefits can increase by 5.5% to 8% each year, depending on your birth year. Benefits stop growing once you reach age 70.

How much can I earn while on Social Security?

Earning limits for early retirement

Those at least 62 but not at full retirement age have an earning limit of $23,400 in 2025. Early retirees are entitled to $700 a month on Social Security benefits for $8,400 annually. If you make more than that, your benefits will be reduced by $1 for every $2 you earn over $23,400.

A Social Security example would be someone with an annual working income of $35,000 will have their benefits reduced by $5,800. The total benefit they will receive for the year is $2,600, which is approximately $217 per month.

Earning limits for full retirement age

The earning limit for folks who reach full retirement age in 2025 is $62,160. This may allow some individuals to pocket more cash without reducing their benefits. Individuals at full retirement age are entitled to $800 per month in benefits.

As of August 2024, individuals at full retirement age can receive full monthly benefits regardless of income.

A worker's earnings impact Social Security benefits. Additional work payments like commissions, bonuses, and vacation pay are included in your earnings. Social Security does not consider pensions, investment income, interest, annuities, veteran benefits, or other government or military retirement benefits as part of your earnings.

Calculating your Social Security benefits

How benefits are calculated

Social Security benefits are calculated based on how much you earned in your lifetime. Your actual earnings are adjusted (or indexed) to account for wage changes since the time you received them.

Your average indexed monthly earnings are then calculated for the 35 years you earned the most. A formula is applied to that figure to determine your basic benefit, known as the primary insurance amount (PIA). That's how much you would receive at your full retirement age.

The SSA provides detailed information about how much you've paid into the program and estimates of how much you'll receive in benefits depending on the age at which you retire. You can get one by creating an online account with the agency.

Factors that affect your benefit amount

Factors that affect how Social Security works for you and how much you receive in benefits include:

• Birth year
• Work history
• Earning history
• Age when claiming Social Security
• If you have a spouse who worked
• Inflation

Economic conditions, such as inflation, can impact Social Security benefits. For example, Social Security and Supplemental Security Income (SSI) benefits increase by 2.5% to offset the rising cost of living in 2025. For retirees, this means an average increase of around $50 per month.

Maximizing your Social Security benefits

When to start taking Social Security

Choosing when to start receiving your retirement benefits is a very important decision. Before making this decision, it's important that you're able to confidently answer the question, "How does Social Security work?"

"For most people, it is best to wait until 70 to receive Social Security benefits, but there are quite a few considerations," Zigmont says. "When to take your benefits is part of your financial plan that will change the course of your retirement for life."

While you can start receiving your Social Security retirement benefits as early as age 62, you aren't entitled to full benefits until you reach your full retirement age. Starting to receive Social Security benefits later rather than sooner can be financially beneficial.

According to the SSA, someone who starts at age 70 will get 132% of what they would have gotten as soon as they reached their full retirement age because they delayed getting them for 48 months. Meanwhile, a worker who chooses to collect at age 62 may see a reduction of as much as 30%.

Coordinating benefits with your spouse

Spousal benefits are Social Security benefits you can collect based on your spouse's earning history rather than your own. You can opt in to receive spousal benefits if you have no working income or your spouse's income exceeds yours. But you can't collect your own Social Security and spousal benefits, only one or the other.

How much you'll receive in benefits varies by age but can range from 32.5% to 50% of your spouse's benefit.

For example, if your spouse at full retirement age receives the maximum benefit of $4,018 in 2025, you can receive up to $2,009 monthly benefits. Collecting spousal benefits does not affect your partner's ability to collect Social Security.

To qualify for spousal benefits, your spouse must be collecting retirement benefits. You must also be 62 and have been married for at least a year.

Social Security and taxes

Taxation of Social Security benefits

Social Security benefits are taxed for people with an income over the annual limit, which is $25,000 for individuals or $32,000 for married couples filing jointly. How much your benefits are taxed depends on your income:

• Up to 50% of the benefits of individuals with incomes between $25,000 and $35,000 (or married couples with incomes between $32,000 and $44,000) will be taxed.
• Up to 85% of the benefits of individuals with incomes of more than $34,000 (or more than $44,000 for married couples) will be taxed.

The best way to minimize taxes on Social Security benefits is to ensure your total combined income is less than the annual income limit. If you're making more than the yearly limit, consider delaying taking Social Security benefits until you're at least full retirement age.

Reporting Social Security income

You can report the taxable portion of your Social Security income on Form 1040 or 1040-SR on line 6b of your income tax return. Also, your Social Security Statement should report your annual Social Security income on Form SSA-1099 in Box 5.

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