Short answer: Social Security pays a monthly retirement benefit based on your highest 35 years of earnings, adjusted for wage growth. You can claim as early as 62, but for anyone born in 1960 or later, claiming at 62 permanently cuts the benefit by about 30% versus waiting until full retirement age at 67, while waiting until 70 raises it by 24%. The average retired worker received about $2,071 a month in January 2026, after a 2.8% cost-of-living adjustment.
How Social Security is funded
Social Security is not a personal savings account with your name on it. It is a pay-as-you-go system: the payroll taxes collected from today’s workers pay today’s retirees. Workers and employers each pay 6.2%, for a combined 12.4%, up to an annual wage cap. In 2026, that taxable wage base is $184,500, so earnings above that amount are neither taxed for Social Security nor counted toward your benefit.
Because it runs on current payroll taxes, long-term shortfalls are debated — but even under pessimistic projections, payroll taxes alone would still fund most of scheduled benefits. Treat Social Security as one leg of retirement income, not the whole plan.
Who qualifies for benefits
You generally need 40 work credits to qualify for a retirement benefit, roughly 10 years of work. You can earn up to four credits a year, the years need not be consecutive, and credits do not expire. The earliest you can claim is age 62. You need not stop working to claim, though the earnings test below may temporarily reduce pre-FRA checks. Check your record at the Social Security Administration.
How your benefit is calculated
Your benefit starts with your earnings history. The Social Security Administration takes your 35 highest-earning years, adjusts each for wage growth (indexing), and divides the total by 420 months to get your Average Indexed Monthly Earnings (AIME). Fewer than 35 years means missing years count as zeros, dragging your average down.
The Administration then applies a formula to your AIME to produce your Primary Insurance Amount (PIA), the benefit at full retirement age. The formula is progressive, replacing a larger share of a low earner’s pay. For workers first becoming eligible in 2026, it pays 90% of the first $1,286 of AIME, 32% of the amount between $1,286 and $7,749, and 15% above $7,749.
Here is a worked example. Suppose your AIME is $6,000:
- 90% of the first $1,286 = $1,157.40
- 32% of the next $4,714 ($6,000 − $1,286) = $1,508.48
- Nothing above $7,749, so the 15% tier does not apply
- Primary Insurance Amount = $1,157.40 + $1,508.48 = $2,665.88 a month
That $2,666 is the benefit at full retirement age; what you actually receive depends on when you claim. Compare it with how much to save for retirement by age and run projections with our compound interest calculator.
When to claim: 62, 67, or 70
Full retirement age is 67 for anyone born in 1960 or later, stepping down to 66 for those born between 1943 and 1954. Claiming early permanently reduces your benefit; delaying past full retirement age, up to 70, earns delayed retirement credits of 8% a year. There is no advantage to waiting past 70.
Example, $2,400 benefit at full retirement age:
| Claiming age | Monthly benefit | Annual benefit |
|---|---|---|
| 62 | $1,680 | $20,160 |
| 67 (full retirement age) | $2,400 | $28,800 |
| 70 | $2,976 | $35,712 |
The 62-vs-70 gap is $1,296 a month, or $15,552 a year, for life. But the age-62 claimant collects $100,800 before age 67, and the higher benefit takes about 11.7 years to catch up — break-even around age 78 or 79. Claim early if you need the income or expect a shorter retirement; delay if you can afford to wait or want a larger survivor benefit.
Working while collecting benefits
If you claim before full retirement age and keep working, the retirement earnings test can withhold part of your benefit. For 2026, the Administration withholds $1 for every $2 earned above $24,480 if you are under full retirement age all year, and $1 for every $3 earned above $65,160 in the year you reach it.
Withheld benefits are not lost: the Administration recalculates your benefit at full retirement age to credit withheld months.
What else Social Security covers
Retirement is only part of the program. Social Security also pays disability benefits, survivor benefits to spouses and children of deceased workers, and spousal benefits — generally up to 50% of the worker’s primary insurance amount at full retirement age.
Benefits are adjusted for inflation each year (2.8% for 2026), and up to 85% of benefits can be taxable depending on combined income. The Internal Revenue Service explains the tax rules, and the Consumer Financial Protection Bureau publishes retirement planning resources. The maximum 2026 benefit is $4,152 at full retirement age and $5,181 at age 70, but those require earning at or above the taxable maximum for roughly 35 years — the average of about $2,071 is the realistic planning number.
Frequently asked questions
How many years do I need to work to get Social Security?
You generally need 40 work credits, roughly 10 years of covered work. You can earn up to four credits per year, the years need not be consecutive, and credits do not expire.
Is it better to claim Social Security at 62 or wait until 70?
It depends on health, income needs, and life expectancy. Claiming at 62 gives income sooner but permanently cuts your benefit by about 30% if your full retirement age is 67. Waiting until 70 raises it by 24%. The 62-versus-67 break-even is around age 78 or 79, so longer-lived retirees tend to come out ahead by waiting.
Can I work while collecting Social Security?
Yes. After full retirement age, you can earn any amount with no reduction. Before it, the 2026 earnings test withholds $1 for every $2 earned above $24,480, or $1 for every $3 above $65,160 in the year you reach full retirement age. Withheld amounts are credited back at full retirement age.
Is Social Security going to run out of money?
No, not in the sense of paying nothing. It is funded mainly by ongoing payroll taxes, so even if the trust funds were depleted, incoming taxes would still cover most of scheduled benefits. Treat it as one part of retirement income — alongside a 401(k) vs IRA strategy and personal savings — not the entire plan.