How Social Security protects workers
An American success story that saved generations from poverty
Understanding the fundamentals of how Social Security operates
Social Security has reliably made payments for 90 years. This government initiative has supported your grandparents, parents, and you, and it will keep supporting your children and grandchildren.
It is a remarkable success story
Social Security offers insurance for death, disability, and old age. Its full name is Old Age, Survivors, and Disability Insurance (OASDI). It acts as insurance that protects workers from losing income due to death, disability, or aging.
You don’t need to be retired to receive Social Security benefits. If the primary income earner dies unexpectedly, their spouse and minor children can get monthly payments.
It also safeguards income when workers become disabled. According to the Social Security Administration (SSA), about one in four people who are currently 20 years old will experience a disability before they retire.
Ninety percent of people aged 65 and older are receiving Social Security benefits. For 40% of these individuals, Social Security is their only income source during retirement.
Social Security is funded by the workers themselves
There is a payroll tax (FICA) on the first $184,500 of a worker’s W2 earnings. For the Social Security part of FICA, employees contribute 6.2% of their wages, matched by their employers at the same rate. Self-employed individuals pay both parts. This tax is specifically designated to fund Social Security benefits, and Congress cannot use these funds for other purposes. This tax is also the only source of income that Social Security depends on to provide benefits. Social Security does not add to the deficit or the national debt.
The trust fund acts like a bank account.
Taxes go into a trust fund, which then pays out benefits. It’s pretty simple. Historically, the trust fund has had a surplus, taking in more taxes than it has given out in benefits.
By law, this surplus is put into interest-earning U.S. Treasury bonds. The latest annual report shows that Social Security has a surplus of $2.7 trillion, which earned $69 billion last year.
It’s normal for Social Security to have a surplus. Since it can’t borrow money, if it doesn’t have enough funds to pay next month’s benefits, people would get smaller checks.
This issue is expected to happen in 2034. Once the trust funds are depleted, beneficiaries will only receive 81 cents for every dollar they should get.
Congress needs to act to maintain the program’s promise to workers.
Social Security benefits help local economies
Nationwide, Social Security provided $1.5 trillion in benefits last year. Most of this was for retirement benefits, but it also included $155 billion for disability benefits and $54 billion for survivors and other programs.
In Minnesota, Social Security benefits given out in 2024 reached $24.3 billion. This is about the same as the total livestock and crop production of the state.
For individuals aged 65 and older, Social Security accounts for nearly one-third of their income. For around 15 percent of beneficiaries, it makes up 90 percent of their income. This money is used for housing and utilities, food, medical and dental care, clothing, and personal care items, mostly within their local communities.