Jane Dotson
Social Security is the term commonly used in the United States for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program. It is administered by the Social Security Administration (SSA) and is funded primarily through payroll taxes. Social Security provides economic security for workers and their families based on their work history. To qualify for Social Security, a person must be insured for benefits, which are based on the worker's earnings. Social Security Disability Insurance (SSDI) or DI provides monthly payments to people who are unable to work due to a significant illness or impairment. Medicare is a separate program from Social Security, but disabled and aged (65 or older) beneficiaries qualify for Medicare. Social Security is nearly universal, with 94% of individuals in paid employment in the US working in covered employment.
| Characteristics | Values |
|---|---|
| Common Term For | Federal Old-Age, Survivors, and Disability Insurance (OASDI) |
| Administered By | Social Security Administration (SSA) |
| Date Passed | 1935 |
| Average Monthly Benefit (as of May 2025) | $1,903 |
| Total Cost (2022) | $1.244 trillion or 5.2% of US GDP |
| Funding Source | Payroll taxes: Federal Insurance Contributions Act (FICA) or Self Employed Contributions Act (SECA) |
| Coverage | 94% of individuals in paid employment; 75% of state and local employees |
| Benefit Eligibility | Based on work history, earnings, and credits (quarters of coverage) |
| Benefit Formula | Weighted to replace a higher portion of lower-paid workers' earnings |
| Benefit Calculation | Based on average indexed monthly earnings (AIME) or average monthly earnings (AME) |
| Disability Insurance | Social Security Disability Insurance (SSDI) or DI provides monthly payments to those unable to work due to illness or impairment |
| Medicare | Separate program, but Social Security beneficiaries aged 65+ qualify |
| Supplemental Security Income (SSI) | Federal program providing monthly benefits to low-income, aged, blind, or disabled individuals |
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What You'll Learn
Social Security Disability Insurance (SSDI)
To be eligible for SSDI, individuals must meet certain criteria related to their age, disability, and work history. They must have a medical condition that is expected to last at least a year or result in death, and they must have worked and paid Social Security taxes for a sufficient period. The specific number of work credits required to qualify depends on the individual's age when their disability begins. Generally, a person needs 40 credits, with 20 earned in the last 10 years, but younger workers may qualify with fewer credits.
SSDI benefits are not just limited to the disabled individual but can also extend to certain family members. This includes the spouse, if they are aged 62 or older, or if they are caring for a child under the age of 16 or a disabled child. Unmarried children under the age of 18, or under 19 if still in high school, may also be eligible for benefits. Additionally, unmarried children aged 18 or older with a disability that began before the age of 22 may qualify if their disability meets the definition of disability for adults.
The SSDI program is funded primarily through payroll taxes, such as the Federal Insurance Contributions Act (FICA) or the Self-Employed Contributions Act (SECA). These taxes are collected by the federal Internal Revenue Service (IRS) and contribute to the Social Security Trust Funds. While SSDI provides crucial support for individuals with disabilities, it is important to note that the program has faced financial challenges due to factors such as the retirement of the baby-boom generation.
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Contributory nature of the program
Social Security in the United States is a federal insurance program that provides economic security for workers and their families. It is funded primarily through payroll taxes, with contributions from both workers and employers. This contributory nature of the program is a fundamental principle that has shaped its development and widespread acceptance.
The Social Security Act was passed in 1935 and has since been amended to include various social welfare and insurance programs. The program is nearly universal, covering 94% of individuals in paid employment in the US. To qualify for Social Security benefits, a person must be insured, which is achieved by acquiring a certain number of credits or quarters of coverage from earnings in covered employment. The number of credits required depends on the worker's age and type of benefit, with workers able to acquire up to four credits per year based on their annual covered earnings.
The amount of money allocated to Social Security is linked to the number of working-class people in the labor force each month. Payroll taxes, known as the Federal Insurance Contributions Act (FICA) or Self-Employed Contributions Act (SECA), are collected by the federal Internal Revenue Service (IRS) and contributed to the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. The benefits received by individuals are based on their earnings, with higher earnings resulting in higher benefits.
The Social Security Disability Insurance (SSDI) or DI program provides monthly payments to workers who are no longer able to work due to a significant illness or impairment. This program is also contributory, with workers and employers paying a Social Security tax of 6.2% of the worker's earnings, up to an annually adjusted cap. Of this, 5.015% goes towards Social Security retirement and survivor benefits, while 1.185% pays for disability insurance. The benefits received by disabled workers are linked to their past earnings and are also paid to their dependent family members.
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Universal Compulsory Coverage
Social Security in the United States is a federal insurance program that provides economic security for workers and their families. It is nearly universal, with 94% of individuals in paid employment in the US working in covered employment. This means that almost all workers are protected if their earnings stop or are reduced due to retirement, disability, or death.
Additionally, Social Security is funded primarily through payroll taxes, such as the Federal Insurance Contributions Act (FICA) or Self-Employed Contributions Act (SECA). These taxes are collected by the federal Internal Revenue Service (IRS) and contribute to the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. While Social Security revenues exceeded expenditures between 1983 and 2009, the retirement of the baby-boom generation is now lowering trust fund balances.
It is important to note that certain groups, such as state and local government workers, are not covered by Social Security. Instead, they have their pension plans operated at the state or local level. As of 2025, about 6.6 million state and local government workers, or 28% of all state and local workers, fall into this category.
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Old-Age, Survivors, and Disability Insurance (OASDI)
In the United States, Social Security is the commonly used term for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program. The Social Security Act was passed in 1935, and the existing version of the Act, as amended, encompasses several social welfare and social insurance programs. The OASDI program is a federal system that offers income support to retirees, people with disabilities, and their families, funded through payroll taxes. It is commonly known as Social Security.
The Old Age, Survivors, and Disability Insurance (OASDI) program provides payments to people who meet certain criteria. For old-age payments, money is paid to qualifying persons starting as early as age 62. Full retirement age depends on the individual's birth date and is 67 for everyone born in 1960 or later. Qualifying persons who wait until age 70 (but no later) to begin collecting benefits collect higher, maximum benefits due to delayed retirement credits. Payments are calculated based on people's past wages earned.
Survivors' payments are made to surviving spouses or dependents of deceased workers. Survivors benefits are potentially payable to a worker's children and to a widow(er) who takes care of the deceased's child who is under age 16 or disabled and receiving Social Security benefits. A dependent parent aged 62 or older is eligible for monthly benefits equal to 82.5% of the worker's PIA. When two dependent parents qualify for benefits, the monthly benefit for each is equal to 75% of the deceased worker's PIA.
Disability payments are made to eligible persons who are no longer able to participate in a substantially gainful activity and who meet additional criteria. To qualify for retirement benefits, a worker must be fully insured. A worker becomes fully insured by accumulating credits (also called quarters) of coverage. Workers disabled at ages 24 through 30 must have earned QCs in one-half of the calendar quarters beginning with the quarter after the quarter in which they turned 21 and ending with the calendar quarter in which the disability began. In this case, the quarters counted will go back before the quarter in which the worker turned 21.
The OASDI program is the federal benefits program better known as Social Security. It covers both retirement income for individuals and surviving spouses, as well as disability income. Workers pay into the program through a tax levied each year on a portion of their income at a rate of 6.2% for employees (or 12.4% for self-employed individuals). That money is then paid out as income benefits to retired or disabled individuals at a rate that is adjusted regularly for inflation.
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Supplemental Security Income (SSI)
SSI is a needs-based program, meaning that eligibility and benefit amounts are determined by the individual's financial situation. Unlike Social Security Disability Insurance (SSDI), SSI does not require the individual to have a work history. It is designed to provide financial assistance to cover basic needs such as food, clothing, and housing for older adults and people with disabilities who have little or no income.
SSI is administered by the Social Security Administration (SSA) and is funded through payroll taxes, such as the Federal Insurance Contributions Act (FICA) and the Self-Employed Contributions Act (SECA). While SSI is a federal program, state governments may also have a role in determining eligibility and providing additional support to recipients.
Individuals can apply for SSI online, by phone, or in person. The application process may vary depending on the individual's circumstances, and there are specific considerations for applying for SSI for a child. It is important to note that eligibility for SSI is based on a comprehensive assessment of the individual's financial situation, and other sources of income or support may impact the amount of SSI benefits received.
SSI is an important program that provides a safety net for older adults and individuals with disabilities who may not have sufficient income or resources to meet their basic needs. By providing monthly payments, SSI helps ensure that this vulnerable population has access to essential necessities and can maintain a certain quality of life.
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Frequently asked questions
In the United States, Social Security is the commonly used term for the federal Old-Age, Survivors, and Disability Insurance (OASDI) program. It was passed in 1935 and is administered by the Social Security Administration (SSA).
Social Security Insurance covers retirement benefits, survivor benefits, and disability benefits. Medicare is a separate program from Social Security, but disabled and aged (65 or older) Social Security beneficiaries qualify for Medicare.
To qualify for Social Security Insurance, a person must be insured for benefits. Most types of benefits require fully insured status, which is obtained by acquiring a certain number of credits from earnings in covered employment. Workers can acquire up to four credits per year, depending on their annual covered earnings.
