What Is Social Security: How OASDI Works, How Much It Pays
Social Security is a federal program that pays retirement, disability and survivors' benefits to qualifying people.
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Nerdy takeaways
- Social Security includes benefits for retirees, people who are disabled and survivors of beneficiaries.
- Beneficiaries must meet criteria to qualify for OASDI.
- Payment amounts can be based on several factors, including age, income and contributions to the OASDI program.
Social Security is an American federal insurance program that provides monthly income to qualifying recipients . Most people know Social Security pays retirement benefits, but Social Security may also pay dependents of retired workers, people with disabilities and family members of workers who have died.
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Social Security is a federal program intended to create financial security for workers and their families. It does this by providing income to aging workers, people who can no longer work because of a disability and workers' children.
Social Security offers three major benefits:
- Retirement benefits, which supplement a portion of someone’s income after they retire so they don’t have to rely solely on savings or nongovernment retirement accounts .
- Survivors benefits, which replace part of the income earned by a worker who died . Their qualifying family members can receive a monthly check.
- Disability benefits, which replace some of the income that individuals with total disabilities lose when they are unable to work due to their conditions .
What is OASDI?
Social Security is also known as OASDI, which stands for Old-Age, Survivors and Disability Insurance. It’s funded primarily by payroll taxes, and because it is an insurance program, people must contribute to the program in advance to qualify for benefits.
Not sure if you contribute to Social Security? Look for the OASDI term on your pay stub. If you pay OASDI tax, you contribute to the program.
The Social Security Administration (SSA) also offers Supplemental Security Income benefits, but this program is not included in OASDI .
Employees and employers each pay a 6.2% OASDI payroll tax on employee earnings up to a certain limit, called the taxable maximum or wage base . Together, the employee and employer contributions equal 12.4% of the worker’s pay. Self-employed workers pay the fully combined 12.4% Social Security OASDI payroll tax themselves .
In 2025, the first $176,100 of earnings is subject to Social Security tax. In 2026, the first $184,500 of earnings is subject to Social Security tax. That means no one pays the OASDI payroll tax on any money earned over that amount regardless of their total annual earnings.
The Social Security Administration uses these taxes and other funds to pay benefits to people who currently qualify for the program.
🤓 Nerdy Tip
If you have multiple jobs in a year and the combined income is more than the taxable maximum, you might pay too much in OASDI tax. You can get a refund for your overpayment when you file your federal income taxes. You can estimate your refund with our free tax calculator. It depends on the type of benefit. The average Social Security benefit amount for a retired worker was $2,009.50 per month in September 2025, according to the Social Security Administration. The average monthly payment to survivors was $1,575.61 and $1,584.46 for disabled workers .
Although several factors affect how the SSA calculates Social Security benefits, two have a big influence:
- How old you are when you begin receiving Social Security benefits .
- How much Social Security tax you paid during your 35 highest-earning years .
To determine how much your Social Security benefit will be, the SSA looks at how much you paid into the program during your working years. Because the calculations rely on a person's highest 35 years of earnings, workers with higher earnings and contributions will likely receive higher Social Security retirement benefits than workers with low earnings and contributions or years spent out of the workforce . However, additional benefits such as spousal benefits may help supplement income for lower earners.
Good to know: If you receive a government or private pension for a job that didn’t contribute to Social Security, the SSA may reduce your benefits. How much the SSA reduces them depends on how much you’ll receive from your pension.
Other factors can affect your monthly benefit, including if you :
- Enroll in Medicare. The Social Security Administration automatically deducts your Part B premium from your Social Security payment.
- Have to pay income taxes on your Social Security benefits. This may happen if your combined income is above a certain amount.
- Are working. There are earnings limits if you are drawing Social Security early.
Your actual benefit may be lower or higher than estimate made with this calculator, because it does not take into account your actual earnings history.
We assume you have earnings every year until you begin receiving Social Security benefits. If you had several years of noncovered employment or your earnings changed significantly from year to year, this calculator will overestimate or underestimate your benefit.
Estimated Social Security retirement benefits
Benefit at expected age
$1,435/monthly
$17,220/annually
This is your estimated benefit
if you begin taking Social Security at age 62
Benefit at full retirement age
$2,473/monthly
$29,676/annually
This is your estimated benefit
if you begin taking Social Security at age 67
Estimated benefits from age 62 to 70
You selected
Full retirement age
Max benefit
Social Security break-even age
Your break-even point is the age at which the cumulative amount you may receive if you file later equals the cumulative amount you may receive if you file early. It signifies the point at which it may "pay off" to wait.
Age 77.5 is the age at which the total number of dollars you receive if you retire at age 70 exceeds the total number of dollars you'll receive if you retire at 67.
cumulative benefits if you file at age 67cumulative benefits if you file at age 70
About these results
We estimated and then indexed your past earnings by using your current annual salary, the national average wage indexing series and the Social Security Administration's annual wage base.
We assume that people age 18 to 22 are less likely to have full-time earnings.
Future earnings are based on correct annual salary and expected annual salary increase.
With the exception of the indexing factor applied to past earnings, the calculations do not include an inflation rate. The results are presented in today's dollars.
Yes, Social Security retirement and disability benefits are taxable in some situations. You may pay federal taxes on your Social Security benefits if you fit in one of these categories :
- You are a single filer with a combined income of more than $25,000.
- You file a joint tax return with a combined income of more than $32,000.
- You file a separate tax return despite being married.
No beneficiary is taxed on more than 85% of their benefits .
People qualify for Social Security benefits when they’ve earned enough credits for the program. Workers earn a credit, known as a “quarter of coverage,” for every $1,810 on which they pay Social Security taxes in 2025 and for every $1,890 on which they pay Social Security taxes in 2026. The SSA limits credits to four per year regardless of annual income.
How many credits you need depends on the type of benefits you need. For retirement benefits, people who turn 62 after 1990 must have at least 40 credits — equal to 10 years of covered work. People who die or develop a disability before turning 62 will qualify for benefits with fewer credits, but how many credits they need will depend on their age when they die or become disabled.
In general, people can claim Social Security benefits as early as age 62 . But the longer you remain in the workforce, the larger your monthly Social Security retirement benefit may be .
- If you retire before reaching full retirement age, the Social Security Administration permanently reduces your benefit .
- If you wait until your full retirement age to start collecting Social Security retirement benefits, you can receive 100% of your monthly retirement benefit.
- If you wait until after full retirement age to retire, the Social Security Administration increases your benefit for every year you wait (up to age 70) .
People receiving survivors' benefits on behalf of a deceased spouse can qualify for retirement benefits as early as age 60 — 50 if they have a qualifying disability .
Should you delay collecting benefits? You’ll earn more per month if you wait until after your full retirement age to collect Social Security, but how much you’ll gain depends on how much your benefit will be at full retirement age. Do the math before making a decision about when to collect Social Security.
Here are the highest monthly Social Security benefits an individual can receive based on when they retire and start collecting benefits.
| Retirement age | Maximum benefit per month if retiring in 2026 |
|---|---|
| 62 | $2,969 |
| 65 | $3,467 |
| 66 | $3,752 |
| 67 | $4,207 |
| 70 | $5,181 |
To qualify for the maximum Social Security retirement benefit, you'd have to earn the maximum taxable wage per year (that is, make the maximum contribution to Social Security) for at least 35 years.
Maximum benefit amounts often change annually to reflect cost-of-living adjustments, referred to as COLAs, every October. The amount depends on the rate of inflation .
Not sure when to retire? When you choose to file for Social Security benefits affects how much your monthly benefit will be. The longer you wait, the higher your monthly earnings. But not everyone will find it’s worth waiting. Check out these articles if you’re debating when to start collecting Social Security.
Want to keep working while collecting Social Security? You can do that, but there are limits for how much you can earn if you haven’t reached full retirement age yet. Read up to ensure you won’t be losing money by working while on Social Security.
Planning for your spouse or children? Depending on the situation, your spouse and children can earn benefits based on your Social Security record. And in some cases, you can get benefits based on your ex-spouse’s Social Security benefits. Here are things to know when spouses and children need to claim benefits.
Not sure how Social Security fits into your retirement plan? Every retirement plan is different. Check out these articles on things you can do now to maximize your benefits and make the most of your retirement.
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- 1. Social Security Administration. Social Security (Old-Age, Survivors, and Disability Insurance) Program Description and Legislative History. Accessed Oct 24, 2025.
- 2. Social Security Administration. Understanding the Benefits. Accessed Oct 24, 2025.
- 3. Social Security Administration. Survivors Benefits. Accessed Oct 24, 2025.
- 4. Social Security Administration. Understanding Social Security Disability Benefits. Accessed Oct 24, 2025.
- 5. Social Security Administration. Supplemental Security Income (SSI). Accessed Oct 24, 2025.
- 6. Social Security Administration. Contribution And Benefit Base. Accessed Oct 24, 2025.
- 7. Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes). Accessed Oct 24, 2025.
- 8. Social Security Administration. Starting Your Retirement Benefits Early. Accessed Oct 24, 2025.
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- 10. Social Security Administration. Retirement Benefits. Accessed Oct 24, 2025.
- 11. Social Security Administration. Plan for retirement. Accessed Oct 24, 2025.
- 12. Social Security Administration. Income Taxes and Your Social Security Benefit. Accessed Oct 24, 2025.
- 13. Social Security Administration. Must I pay taxes on Social Security benefits?. Accessed Oct 24, 2025.
- 14. Social Security Administration. Eligibility for Social Security in retirement. Accessed Oct 24, 2025.
- 15. Social Security Administration. You Can Receive Benefits Before Your Full Retirement Age. Accessed Oct 24, 2025.
- 16. Social Security Administration. Early or Late Retirement?. Accessed Oct 24, 2025.
- 17. Social Security Administration. Delayed Retirement Credits. Accessed Oct 24, 2025.
- 18. Social Security Administration. Who can get Survivor benefits. Accessed Oct 24, 2025.
- 19. Social Security Administration. Cost-of-Living Adjustment. Accessed Oct 24, 2025.
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