What Is Social Security?

Social Security, also known as the Old-Age, Survivors and Disability Insurance (OASDI) program, provides monthly benefits to qualifying retirees and disabled individuals. In some cases, you can qualify for benefits as a survivor or family member.

The Social Security program is funded through payroll taxes. In 2023, employers and employees pay 6.2% of wages up to the taxable maximum of $160,200. If you’re self-employed, you’ll pay 12.4% in taxes, according to the Social Security Administration.

Each year, there is also a cost-of-living adjustment (COLA), for Social Security benefits. The COLA in 2023 is the highest it has been for the last 40 years, raising benefits by 8.7%. From 2009 to 2020, the COLA never surpassed 3.6%, according to an article from the Social Security Administration.

If you meet specific qualifications, Social Security will send you monthly benefits. The qualifications vary depending on whether you need retirement, disability or survivor benefits. In all cases, you do need a specific number of credits to qualify, and you earn the credits by working.

In 2023, you earn one credit for every $1,640 in covered earnings each year. You can earn a maximum of four credits per year.

Source: Social Security Administration

For December 2022, the average Social Security benefit was $1,688 per month or $20,256 per year. According to the Social Security Administration, benefits will increase by over $140 on average in 2023. You can expect the average Social Security benefit to be around $1,827 per month in 2023.

Retired workers, disabled individuals, spouses, children, widows and widowers can benefit from Social Security. As of December 2022, 73.6% of those receiving benefits from Social Security were retired workers, according to the Social Security Administration.

In December 2022, retirees made the highest average benefit amount at $1,825 a month when compared to an aged widow/widower or disabled individual. The average monthly survivor’s Social Security benefit amount was $1,705 for an aged widow or widower. And the average monthly disability benefit was $1,483.

Social Security benefits have been taxable as income tax since 1983.

“Social Security benefits are generally subject to federal income tax; however, the extent to which they are taxed depends on the individual’s income level and filing status,” Andrew Lokenauth, founder of Fluent in Finance, told RetireGuide.

“For example, if you have other sources of income such as wages, interest or dividends, a portion of your Social Security benefits may be subject to federal income tax. But it’s worth noting that as of 2021, not all states tax Social Security benefits and not all recipients are required to pay taxes on them.”

Most Americans on Social Security must pay income taxes on their Social Security benefits. You may have to pay taxes on  50% to 85% of your Social Security income, depending on your income.

Spousal, survivor and disability benefits follow the same basic income tax rules as Social Security benefits. However, SSI benefits for people with low incomes and limited resources are not taxed.

You can contact the Social Security Administration online, in person or over the phone at 1-800-772-1213.

To find a Social Security office near you, use the Social Security Administration’s office locator tool.

Depending on which service you need, you may have other resources available for you. For example, if you need to replace a Social Security card or report a lost check, refer to the Social Security Administration’s list of online services.

The best way to prevent Social Security fraud is to remain vigilant and not share personal information with strangers who contact you. Scammers will pretend to be government officials in attempts to get your information.

The Social Security Administration will only contact you via text or email if you’ve opted to receive them. The only texts or emails sent will be regarding programs, services or a login verification to access your Social Security account. They will never ask for a return call to an unknown number or for personal information.

According to an article from Yahoo, there is a new scam related to the high 2023 COLA increase. Scammers are claiming that you must pay a fee or provide personal information to receive the 8.7% increase. This is not true. If someone calls asking you to pay a fee or requests private information for a COLA increase — it is a scam.

If you aren’t sure if a call or email from Social Security is legitimate, hang up and report it to the Office of the Inspector General.

Social Security is expected to run out of cash reserves in 2034, according to the Old-Age and Survivors Insurance Trust Fund, which is the retirement benefits account managed by the Social Security Administration.

However, this doesn’t mean the program would be bankrupt and unable to pay out benefits. If Congress does nothing to reform the system by 2034, Social Security would still be able to pay 79% of promised benefits until 2090.

Social Security has run out of cash reserves before. Congress reformed the program in the 1980s by taxing benefits based on income levels and by gradually increasing the full retirement age from 65 to 67.

Medicare and Social Security are both federal programs. Because they are both associated with retirement in the United States, people often think they are part of the same organization, but they are not.  Different agencies run each program within the federal government.

Medicare provides coverage for inpatient and outpatient care, nursing care, prescription drugs and medical supplies to those 65 years or older. Social Security oversees paying qualified individuals’ retirement, disability, family and survivor benefits.