Social Security is funded by a payroll tax split between you and your employer

The federal payroll tax that supports retired workers is Social Security tax, formally called the Old-Age, Survivors, and Disability Insurance (OASDI) tax. It appears on your pay stub as a deduction, and your employer contributes an equal amount on your behalf. Together, these contributions fund monthly payments to people who have retired, as well as to survivors of deceased workers and people receiving disability benefits.

The tax rate is fixed by federal law. As of 2024, you pay 6.2% of your wages, and your employer pays another 6.2%, for a combined total of 12.4%. If you are self-employed, you pay both portions yourself — 12.4% of your net self-employment income. The money does not go into a personal account; it goes into a single federal trust fund that pays current beneficiaries.

There is a wage cap: in 2024, you only pay Social Security tax on income up to $168,600 per year. Earnings above that amount are not subject to the tax. This cap changes each year based on national wage trends.

Key Takeaways

  • Social Security tax is 6.2% of your wages, with your employer contributing an equal 6.2%, and it funds retirement, survivor, and disability benefits.
  • The tax applies only to wages up to an annual cap, which was $168,600 in 2024 and increases yearly.
  • You must work and pay Social Security tax for at least 10 years (40 quarters) to become may be able to access for retirement benefits.
  • The amount you receive in retirement depends on your earnings history and the age at which you claim benefits, not on how much tax you paid.
  • Self-employed people pay both the employee and employer portions of the tax, totaling 12.4% of net self-employment income.

How much you need to pay to become may be able to access for retirement benefits

You do not need to pay a certain dollar amount. Instead, you need to accumulate 40 work credits, which is roughly 10 years of work. In 2024, you earn one credit for every $1,730 in wages you make, up to a maximum of four credits per year. This means you can earn all four credits in a single year if you make at least $6,920, or you can spread them across multiple years.

Once you have 40 credits, you are permanently may be able to access for retirement benefits whenever you choose to claim them. You do not lose credits if you stop working. The credits remain on your record for life.

The amount of your monthly benefit is separate from the number of credits. It is based on your average earnings over your highest 35 years of work. If you worked fewer than 35 years, zeros are counted for the missing years, which lowers your average. Working longer and earning more can increase your benefit amount.

When you can start receiving retirement payments

You can claim Social Security retirement benefits as early as age 62, but your monthly payment will be permanently reduced — typically by about 30% if you claim at 62 instead of waiting until your full retirement age. Your full retirement age depends on your birth year and ranges from 66 to 67 for people born in 1943 or later.

If you wait until age 70 to claim, your monthly benefit increases by about 8% for each year you delay past your full retirement age. There is no benefit to waiting past 70. Most people claim somewhere between 62 and 70, depending on their health, finances, and life expectancy.

You can view your earnings record and see an estimate of your future benefits by creating an account at ssa.gov. The Social Security Administration sends this information to you automatically starting at age 60.

What happens to your benefits if you continue working

If you claim benefits before your full retirement age and continue to work, your benefits are reduced if you earn above a certain threshold. In 2024, if you are under full retirement age for the entire year, $1 in benefits is withheld for every $2 you earn above $23,400. The year you reach full retirement age, the limit is higher and applies only to earnings before the month you reach that age.

Once you reach your full retirement age, there is no earnings limit. You can work and earn as much as you want without any reduction to your benefits. This is one reason some people wait until full retirement age to claim.

The withheld benefits are not lost. Social Security recalculates your benefit amount at full retirement age to account for the months benefits were withheld, which increases your monthly payment going forward.

Who else receives benefits from Social Security tax revenue

Social Security is not only for retirees. The same payroll tax funds benefits for three groups: retired workers, survivors of deceased workers, and people with disabilities. About 67 million people receive some form of Social Security benefit, and roughly 42 million of them are retirees.

Survivors benefits go to the spouse and children of a worker who dies, even if that worker had not yet retired. A widow or widower can claim at 60 (or 50 if disabled), and unmarried children can claim until age 19 (or 23 if still in high school). The total family benefit is capped at about 150% to 180% of what the deceased worker would have received.

Disability benefits go to workers under full retirement age who have a severe medical condition expected to last at least 12 months or result in death. You do not need 40 credits to may have access to for disability — the requirement is lower and depends on your age when you become disabled. Family members of a disabled worker can also receive benefits.

How Social Security tax differs from income tax

Social Security tax and federal income tax are two separate deductions on your pay stub. Social Security tax is a flat 6.2% (or 12.4% if self-employed) with a wage cap. Income tax is progressive, meaning the rate increases as you earn more, and there is no wage cap — it applies to all income.

Social Security tax funds only Social Security benefits. Income tax funds general federal operations, defense, infrastructure, and many other programs. You can owe income tax even if you have no Social Security tax liability, and vice versa.

Self-employed people can deduct half of their self-employment tax (which includes both Social Security and Medicare tax) when calculating their adjusted gross income for income tax purposes. This is a partial offset to paying both the employee and employer portions.

What to do if you notice an error in your Social Security record

Your earnings record is the foundation of your benefit calculation. If you see missing or incorrect earnings, you should report it to the Social Security Administration. You can create a my Social Security account at ssa.gov to view your record for free.

If you find an error, contact your local Social Security office or call 1-800-772-1213. You will need to provide documentation such as W-2 forms, tax returns, or a letter from your employer showing the correct earnings. Social Security can correct errors going back up to three years, nine months, and 15 days from the date of the error.

Errors are more common than many people realize, especially for people who changed jobs, had name changes, or worked for employers with payroll processing problems. Checking your record every few years takes about 10 minutes and can prevent a lower benefit amount in retirement.

Frequently Asked Questions

Can I get my Social Security tax money back if I decide not to retire?

No. Social Security tax is not a savings account or investment. The money you and your employer pay goes into a federal trust fund that pays current beneficiaries. If you die before claiming benefits, your family may be may be able to access for survivor benefits, but you cannot withdraw your contributions.

What if I worked in another country — do those years count toward my 40 credits?

Generally, no. Work performed outside the United States does not count toward Social Security credits unless you were a U.S. citizen or resident alien and paid Social Security tax on those wages. Some countries have agreements with the U.S. that allow work credits to be combined, but this is rare and country-specific. Contact Social Security to discuss your specific situation.

Do I have to pay Social Security tax if I am a student or work part-time?

Yes, if you earn wages, your employer must withhold Social Security tax. There is no exemption for students or part-time workers. However, if you are self-employed and your net earnings are less than $400 per year, you do not owe self-employment tax. If you are a student employed by your school, there may be limited exemptions depending on your visa status.

Will Social Security run out of money?

The Social Security trust fund is projected to be depleted around 2034 if no changes are made to the program. After that date, incoming payroll tax revenue would cover about 80% of scheduled benefits. Congress would need to act before then to adjust tax rates, raise the wage cap, change benefit formulas, or raise the full retirement age. No benefits would be automatically cut.

Can I claim Social Security benefits if I never worked?

No, you must have earned 40 work credits to claim retirement benefits on your own record. However, you may be able to claim spousal or survivor benefits based on your spouse's or ex-spouse's earnings record, even if you never worked. Spousal benefits are typically 32% to 50% of the worker's full retirement age benefit amount.