Social Security FAQ: 5 Important Things to Know
Saving for retirement is easier said than done, especially with a high rate of inflation. The annual inflation rate in the US was 8.3 percent in 2022, up from 3.2 percent in 2011. Moreover, average prices increased by 3.1 percent from January 2023 to January 2024. This, along with other factors, is a big reason why many Americans are unprepared for retirement. According to U.S. Census Bureau data, almost half of the population aged 55–65 have no retirement savings.
The Social Security Administration (SSA) provides older Americans with retirement benefits beginning at 62 years old. While these benefits are not enough on their own to replace a retired person’s income during their working years, they’re invaluable to many lower-earning Americans without retirement savings.
Americans can start collecting Social Security benefits at 62, but the SSA reduces these payments from those offered at full retirement age (67 for people born in 1960 or later). Payments are determined based on the person’s 35 highest-earning years, but that doesn’t mean a person needs to work that long to earn Social Security.
Below are five frequently asked questions about Social Security and their answers.
1. How Long Do You Have to Work to Qualify for Benefits?
Americans can qualify for Social Security benefits after working for 10 years, even in low-income positions. You need 40 Social Security credits, earned by paying Social Security tax, to qualify for benefits. As of 2024, workers needed to make just $1,730 to earn one credit; however, you can only earn four credits each year. Benefits are progressive, meaning lower-earning workers receive a greater percentage of their pre-retirement income than higher earners. You can get an estimate of your future benefits by viewing your Social Security statement at ssa.gov/myaccount.
There are cases in which people who don’t earn sufficient credits can receive Social Security benefits. People can qualify for the program based on the work record of a parent, spouse, or former spouse. The SSA also administers Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
2. How Many Americans Receive Social Security Benefits?
According to the SSA, nearly 68 million Americans will earn monthly benefits in 2024. The SSA expects to pay out a total of $1.5 trillion in benefits. In December 2023, the SSA paid out $95.5 billion to 50.1 million retired Americans, $11.3 billion to 7.4 million American workers with disabilities, and $8.8 billion to 5.8 million survivors. It also paid nearly $3 billion to dependents of retirees and people with disabilities.
Also in December, almost 90 percent of people 65 and older received a Social Security benefit. These payments are the primary source of income for 42 percent of women and 37 percent of men 65 and older. Moreover, 15 percent of women and 12 percent of men receive 90 percent or more of their total income from Social Security.
3. Does Social Security Keep up with Inflation?
One of the few benefits that Social Security has over private pensions such as 401(k)s and annuities is that they are adjusted for inflation. The U.S. government instituted legislation in 1973 to ensure benefits would keep up with cost-of-living adjustments (COLAs). Payable benefits in January 2024, for instance, increased by 3.2 percent to keep up with COLAs. This rate is determined via changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers, which is calculated monthly by the Bureau of Labor Statistics.
4. Can non-Americans Receive Social Security?
You don’t have to be an American citizen to qualify for Social Security. Non-U.S. citizens earn Social Security credits if they are living in the country legally. They must either be permanent legal residents, have working visas, or be permitted to live in the United States through the Immediate Relative or Family Unity immigration law provisions.
Non-citizens living in another country can also still receive Social Security if they earned sufficient credits during their time in the US. Similarly, noncitizens living abroad whose spouse is American can also qualify for benefits in some instances. Examples include if their country has a Social Security agreement with the US or if their spouse died while serving the U.S. military.
Undocumented immigrants, who often get jobs using fraudulent Social Security numbers, pay into the Social Security system but rarely receive benefits.
5. Is Social Security Guaranteed in the Future?
As important as Social Security is to so many Americans, there’s a possibility the program could be significantly underfunded within the next decade. At present, the SSA has an excess in reserve funds, but will provide benefits to a greater percentage of Americans in the next 10 years, due in large part to declining birth rates since 1964. Unless Congress passes legislation to increase the Social Security tax revenue, retirees may only be able to receive about 77 percent of their full benefits by 2034.
“The 401(k) system has worked well for, let’s say the top 40 percent of workers and is not much help for the bottom 60 percent,” notes Alicia Munnell, director of Boston College’s Center of Retirement Research. “A lot of our population has nothing else to rely on other than Social Security, so you really don’t want to have that benefit level cut.”
Since any significant reduction in benefits would be very politically risky, even looking out 10 years, to 2034, it is entirely possible that the Social Security Administration will continue to pay out 100% of the projected or promised benefits at that time, but that the buying power of those dollars may be significantly reduced by inflation. In other words, the government may try to inflate away part of the problem by devaluing the payments over time-the equivalent of a cut.
