Overview

1. What is Social Security?

• Purpose: Social Security is a government program administered by the Social Security Administration (SSA) to provide income support for:
  • Retirement: Monthly payments for eligible retirees (typically starting at age 62, with full benefits at 66–67 depending on birth year).
  • Disability: Benefits for individuals unable to work due to a qualifying disability.
  • Survivors: Payments to spouses, children, or dependents of a deceased worker.
• Funding: The program is primarily funded through payroll taxes called FICA taxes (Federal Insurance Contributions Act), which include contributions for Social Security and Medicare.

2. Who Participates in Social Security?

• Employees: Most workers in the U.S., including full-time, part-time, and some self-employed individuals, contribute to Social Security through payroll taxes.
• Employers: Employers also contribute an equal amount on behalf of their employees.
• Self-Employed: Individuals who work for themselves pay both the employee and employer portions of the tax.
• Non-Citizens: Legal residents, including those with work-authorized visas (e.g., H-1B, L-1), green card holders, and certain other statuses, contribute to and may be eligible for Social Security benefits, depending on their work history and visa type.
• Exclusions: Some groups, like certain nonresident aliens, some federal employees hired before 1984, or those with specific exemptions (e.g., religious exemptions), may not participate.

3. How Social Security is Deducted

• FICA Tax Breakdown:
  • Social Security Tax: 6.2% of your wages (up to a taxable maximum, which is $168,600 in 2025).
  • Medicare Tax: 1.45% of all wages (no cap, with an additional 0.9% for high earners above $200,000/$250,000 for single/joint filers).
  • Total FICA: 7.65% (6.2% + 1.45%) for most employees.
• Employer Contribution: Employers pay an additional 6.2% for Social Security and 1.45% for Medicare, matching the employee’s contribution.
• Self-Employed: Pay the full 12.4% for Social Security (up to the wage cap) and 2.9% for Medicare, known as the self-employment tax. However, they can deduct half of this tax on their income tax return.
• How Deductions Work:
  • Employees: The 7.65% FICA tax is automatically withheld from your paycheck by your employer and appears on your pay stub as “Social Security” or “FICA.” The employer sends these funds to the IRS, which allocates them to the SSA.
  • Self-Employed: You calculate and pay self-employment tax when filing your annual federal income tax return (Form 1040), typically quarterly through estimated tax payments.
  • Pay Stub Example: If you earn $1,000 per paycheck, $62 (6.2%) goes to Social Security, and $14.50 (1.45%) goes to Medicare, totaling $76.50 withheld for FICA.
• Taxable Wage Cap: In 2025, only the first $168,600 of your annual income is subject to the Social Security tax. Earnings above this amount are not taxed for Social Security but are still subject to Medicare tax.

4. How Social Security Benefits Are Paid

• Eligibility for Benefits:
  • You earn credits by working and paying Social Security taxes. In 2025, you earn one credit for every $1,730 in earnings, up to four credits per year.
  • You generally need 40 credits (about 10 years of work) to qualify for retirement benefits. Fewer credits may qualify you for disability or survivor benefits.
  • Non-citizens may qualify if they have a valid Social Security Number (SSN) and meet work requirements, but benefits depend on their immigration status and country of origin (some countries have agreements with the U.S. for benefit portability).
• Benefit Calculation:
  • Benefits are based on your Average Indexed Monthly Earnings (AIME), calculated from your 35 highest-earning years (adjusted for inflation).
  • The SSA applies a formula to your AIME to determine your monthly benefit. Higher earners receive larger benefits, but the system is progressive, providing a higher replacement rate for lower earners.
• Receiving Payments:
  • Benefits are paid monthly, typically via direct deposit to a U.S. bank account or a Direct Express debit card for those without a bank account.
  • Payments are scheduled based on your birth date (e.g., the second, third, or fourth Wednesday of the month).
  • For retirees, benefits can start at age 62 (reduced amount) or at full retirement age (66–67), with increased benefits if delayed up to age 70.
• Taxes on Benefits: Depending on your income, up to 50–85% of Social Security benefits may be taxable. You may need to pay federal income tax on benefits when filing your annual tax return.

5. Key Information for Newcomers

• Social Security Number (SSN): You need an SSN to work and pay Social Security taxes. Apply for one through the SSA if you’re a legal resident with work authorization.
• Check Your Earnings Record: Create an account at ssa.gov/myaccount to verify your earnings history and estimated future benefits. Errors in your record can affect your benefits, so review annually.
• Non-Citizens and Benefits:
  • If you leave the U.S., you may still receive benefits, but it depends on your country of residence and U.S. treaties. Some countries have “totalization agreements” to combine work credits from both nations.
  • Certain visa holders (e.g., F-1 students) may be exempt from FICA taxes if they’re nonresidents, but this doesn’t apply to green card holders or work-authorized visas.
• Tax Reporting: Your employer reports your FICA contributions to the SSA. If self-employed, you report earnings via your tax return.
• Scams: Beware of fraudulent calls or emails claiming to be from the SSA. The SSA will not call unexpectedly to demand payment or personal information. Verify communications through ssa.gov or by calling 1-800-772-1213.

6. Practical Steps for Newcomers

• Get an SSN: Visit an SSA office with your immigration documents (e.g., visa, passport, I-94) to apply.
• Understand Your Pay Stub: Look for FICA deductions to confirm Social Security contributions.
• Save for Retirement: Social Security alone may not cover all expenses in retirement, so consider additional savings (e.g., 401(k), IRA).
• Contact the SSA for Help: If you have questions about eligibility, benefits, or deductions, call the SSA or visit a local office. Many resources are available in multiple languages.

Example Scenario:

• You’re a newcomer working a job earning $3,000/month. Your paycheck shows:
  • Social Security tax: $186 (6.2% of $3,000).
  • Medicare tax: $43.50 (1.45% of $3,000).
  • Total FICA: $229.50 withheld per month.
• Your employer also pays $229.50 to the SSA on your behalf.
• These contributions earn you credits toward future benefits. After 10 years of work, you’d likely qualify for retirement or disability benefits.