You've paid into Social Security from your first paycheck without anyone explaining what you're buying. Here is where the money goes, how you earn a benefit, how the monthly amount is figured, and what the program's finances mean for the check you'll eventually get.
Where the money comes from: FICA
The Social Security line on your pay stub (sometimes labeled OASDI) is part of the FICA payroll tax. For 2025 you pay 6.2% of wages up to the $176,100 wage base for Social Security and 1.45% of all wages for Medicare; your employer matches both. If you're self-employed you pay both halves as self-employment tax — 15.3% in total, 12.4% plus 2.9%.
| Who pays (2025) | Social Security | Medicare | Total |
|---|---|---|---|
| You, from each paycheck | 6.2% of wages up to $176,100 | 1.45% of all wages | 7.65% |
| Your employer | 6.2% | 1.45% | 7.65% |
| Self-employed (both halves) | 12.4% | 2.9% | 15.3% |
On a $52,000 salary paid every two weeks, that is $124 of Social Security tax and $29 of Medicare tax out of each check. Run your own numbers in the paycheck estimator.
Earning the right to a benefit: 40 credits
You qualify for a retirement benefit by earning 40 credits — about 10 years of work. In 2025 each $1,810 of covered earnings buys one credit, up to 4 credits a year, so $7,240 of earnings collects the year's maximum. Credits never expire; they accumulate across your whole working life, and they also back your disability and survivor coverage (disability benefits explained covers that side).
| Credits | Rule (2025) |
|---|---|
| Earning one | $1,810 of covered earnings |
| Maximum per year | 4 ($7,240 of earnings) |
| Needed for retirement benefits | 40 — about 10 years of work |
How your monthly benefit is figured
Social Security indexes each year of your earnings for wage growth, takes your 35 highest years, and averages them into a monthly figure called AIME (average indexed monthly earnings). Fewer than 35 years of work means zeros in the average. A three-step formula then turns AIME into your primary insurance amount (PIA) — your benefit at full retirement age, which is 67 if you were born in 1960 or later.
| AIME slice (turning 62 in 2025) | Share that becomes benefit |
|---|---|
| First $1,226 | 90% |
| $1,226 to $7,391 | 32% |
| Above $7,391 | 15% |
The formula is deliberately progressive: a lower earner gets a benefit that replaces a larger share of past wages than a higher earner does. Overall, Social Security replaces about 40% of pre-retirement earnings for an average earner. Claiming before 67 permanently shrinks the PIA (by 30% at 62); waiting past it earns delayed retirement credits of 8% a year to age 70 — the subject of When to claim.
Where your numbers live
Your earnings record, your credits and your benefit estimates at 62, 67 and 70 are in your free my Social Security account at ssa.gov/myaccount and on your Social Security Statement. Check the record every year or two: an employer that misreported a year of wages lowers your benefit for life, and fixing it is far easier while you still have the W-2.
The trust fund: what "running out" means
The 2026 Trustees Report projects that the retirement trust fund's reserves are depleted in the fourth quarter of 2032; from then on, incoming payroll taxes cover 78% of scheduled benefits. Combined with the disability fund, the date is 2034 and the share is 83%. "Running out" therefore means a cut of roughly one-fifth if Congress changes nothing, not a benefit of zero — and every previous shortfall has been closed by legislation. Plan on the benefit; don't plan on it being your only income.
One recent change works in your favor. The Social Security Fairness Act, signed January 5, 2025, repealed the Windfall Elimination Provision and the Government Pension Offset, which had reduced benefits for people with pensions from work not covered by Social Security — many teachers, police officers and firefighters. The repeal applies to benefits payable retroactive to the January 2024 benefit month.