USA How Social Security Works in the U.S.: Benefits, Eligibility & Taxes Explained

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How does Social Security work in U.S?​

Learn how Social Security works in the U.S., including eligibility, benefits, payroll taxes, retirement age, and future challenges. Get a clear breakdown of Social Security benefits today!​

Social Security in the U.S. is a government program that provides financial benefits to retired workers, disabled individuals, and survivors of deceased workers. It's funded through payroll taxes collected under the Federal Insurance Contributions Act (FICA).

How It Works:​

1. Paying Into Social Security
   • Workers and employers each pay 6.2% of wages (up to an income limit) into Social Security.
   • Self-employed individuals pay 12.4% since they cover both portions.
   • These contributions go into the Social Security Trust Fund, which is used to pay benefits.
2. Earning Credits
   • Workers earn credits toward Social Security benefits by paying payroll taxes.
   • In 2024, one credit is earned for every $1,730 in wages, up to four credits per year.
   • You need 40 credits (about 10 years of work) to qualify for retirement benefits.
3. Receiving Benefits
   • Retirement Benefits
     • Workers can start collecting benefits as early as age 62, but full retirement age (FRA) depends on birth year (currently 66–67).
     • Waiting until age 70 increases benefits (delayed retirement credits).
   • Disability Benefits (SSDI)
     • Available to workers who can’t work due to a disability that is expected to last at least one year or result in death.
   • Survivor Benefits
     • Paid to spouses, children, or dependent family members of a deceased worker.
   • Supplemental Security Income (SSI)
     • Separate from Social Security, it provides aid to low-income individuals who are elderly, blind, or disabled.

How Are Benefits Calculated?​

• Based on average earnings over the highest 35 years of work.
• The Social Security Administration (SSA) uses a formula that replaces a higher percentage of income for lower earners.

Challenges & Future of Social Security​

• The trust fund is projected to run out of reserves by 2035, meaning benefits may be reduced unless Congress takes action.
• Possible solutions include raising taxes, increasing the retirement age, or reducing benefits.