Social Security began in 1935 as a federal insurance program during the Great Depression

President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935. The program was created to provide income to workers who were retired, unemployed, or unable to work due to disability. At that time, most older Americans had no savings and no pension, and the economic collapse had wiped out what little security many families had.

The first monthly benefit was paid on January 31, 1940, to a woman named Ida May Fuller in Vermont. She received $22.54 — the first of many payments she would collect over her lifetime. By the end of 1940, about 222,000 people were receiving Social Security payments each month.

Key Takeaways

  • Social Security was created by federal law in 1935 during the Great Depression to provide income security for retired workers, the unemployed, and people with disabilities.
  • The program was funded from the start by payroll taxes paid by workers and employers, not by general government funds.
  • The first monthly benefit was paid in January 1940, more than four years after the law was signed.
  • Social Security expanded over time to include survivors' benefits for family members of deceased workers and Medicare for people age 65 and older.

Why Social Security was created in 1935

The Great Depression left millions of Americans without work or savings. Elderly people who could no longer work had no income and often depended on their adult children or charity. There was no national safety net. Roosevelt's administration designed Social Security as a way to reduce poverty among older workers and provide some economic stability.

The program was modeled partly on insurance systems that already existed in other countries, including Germany and Britain. The idea was that workers would pay into a fund during their working years, and that fund would pay them back after they retired or became unable to work.

How Social Security was funded from the beginning

Social Security was never funded by general tax revenue. Instead, it was funded by a dedicated payroll tax — a percentage taken directly from workers' paychecks. Employers paid an equal amount. This tax was called the Federal Insurance Contributions Act (FICA) tax, and it still funds Social Security today.

When the program started, the tax rate was 1 percent of wages, split between worker and employer. The tax rate has changed many times since then. As of 2024, the rate is 12.4 percent of wages (6.2 percent from the worker, 6.2 percent from the employer), up to a maximum income level that changes each year.

Who could receive Social Security in 1935

The original 1935 law covered only retired workers age 65 and older. It did not cover farm workers, domestic workers, or the self-employed — groups that made up a large share of the workforce at the time, particularly workers of color in the South. These exclusions were intentional and reflected the political compromises needed to pass the law.

Over the following decades, coverage expanded. By 1950, farm workers and domestic workers were added. By 1956, the program began paying benefits to disabled workers and to the spouses and children of retired or deceased workers. In 1965, Medicare was created as a companion program to provide health insurance to people age 65 and older.

The difference between Social Security in 1935 and today

The basic structure has remained the same: workers and employers pay payroll taxes, and those taxes fund monthly payments to retirees, disabled workers, and survivors. But the program has grown significantly. In 1940, about 222,000 people received benefits. Today, over 67 million people receive Social Security payments each month.

The benefit amounts have also changed. Ida May Fuller's first check was $22.54. Today, the average monthly benefit is several hundred dollars, though the exact amount depends on how much a person earned during their working years and when they start receiving benefits. The program has also added cost-of-living adjustments (COLAs) to help benefits keep pace with inflation.

What happened to Social Security after 1935

The program faced a major crisis in the early 1980s when the trust fund was projected to run out of money within months. Congress passed a bipartisan reform in 1983 that raised payroll taxes, gradually increased the full retirement age, and made some benefits subject to income tax for higher-income retirees. These changes were meant to keep the program solvent for decades.

Since then, Social Security has remained the largest source of income for most people age 65 and older. However, demographic changes — particularly the aging of the Baby Boom generation and longer life expectancy — have created long-term funding challenges. The Social Security trustees project that the trust fund will be depleted sometime in the 2030s if no changes are made, though benefits would still be paid from incoming payroll taxes.

Frequently Asked Questions

Did Social Security exist before 1935?

No. Before 1935, there was no federal Social Security program in the United States. Some states had unemployment insurance or old-age pensions, and some employers offered pensions, but there was no national program. Most elderly Americans relied on family support or charity.

Why did it take until 1940 for the first benefit to be paid?

The law was signed in 1935, but the program needed time to set up the administrative systems, collect payroll taxes, and build up the trust fund. The first benefit was paid on January 31, 1940, nearly five years after the law was signed.

Has Social Security always been funded by payroll taxes?

Yes. From the beginning, Social Security was funded by FICA taxes paid by workers and employers, not by general government revenue. This is why it is called an insurance program — workers pay in during their working years and receive benefits later.

What groups were left out of Social Security in 1935?

Farm workers, domestic workers, and the self-employed were excluded from the original program. These exclusions particularly affected workers of color in the South. Coverage expanded over time, and most of these groups were added by 1950.