ECONOMY STUDIOThe first monthly Social Security check went to Ida May Fuller, a retired legal secretary in Vermont. It was dated January 31, 1940, and it was for $22.541. She had paid $24.75 in Social Security taxes2. She lived to 100 and collected $22,888.92, about 925 times what she paid in2.
That only worked because Social Security was never a savings account. Here is how the money moves today.
Where the money comes from
Workers pay 6.2% of their wages into Social Security, and their employer pays another 6.2%, on earnings up to $184,500 in 20263. An estimated 184.7 million people paid in during 2025, and payroll taxes were about 91% of the retirement fund’s income4. The rest came from income tax on benefits and interest on the fund’s savings4.
That money goes straight out again. At the end of 2025, 62.3 million people received retirement and survivor benefits and 8.2 million received disability benefits, about 70 million in all5.
Fewer workers for every retiree
In 1950 there were 16.5 workers paying in for every person collecting6. By 2025 there were 2.6, and the Trustees project 2.3 by 20356.
The Trustees give the reasons: the baby boomers are retiring, and lower birth rates and lower immigration slow the growth of the workforce. The 2026 report cut its long-run birth-rate assumption from 1.90 to 1.75 children per woman7.
Since 2021, Social Security has cost more each year than it takes in. In 2025 the gap was $160.2 billion, and the retirement fund’s reserves fell from $2,538.3 billion to $2,338.3 billion8.
What 2032 and 2034 really mean
The reserves are a buffer, and the buffer is shrinking. The Trustees project that the retirement fund can pay full benefits until late 2032, and 78% of scheduled benefits after that9. If the retirement and disability funds are counted together, they last until 2034 and can then pay 83%, a cut of about 17% across the board9.
Running out of reserves does not mean the checks stop: payroll taxes keep coming in, which is why most benefits can still be paid9. The Trustees also write that lawmakers have many options to close the gap, and that acting sooner allows more choices and more time to phase changes in10.
How your benefit is calculated
Social Security averages your highest-earning years, adjusted for wage growth, into average monthly earnings11. The 2026 formula then pays 90% of the first $1,286, 32% of earnings up to $7,749, and 15% above that11. With $5,000 of average monthly earnings, that is $2,345.80 a month at full retirement age, about 47% of earnings11.
The age you start matters too. For people born in 1960 or later, full retirement age is 6712. Starting at 62 cuts the monthly benefit by 30%, so $1,000 becomes $700, and waiting past 67 adds 8% a year until 70, so $1,000 becomes $1,24012. This is how the rules work, not a recommendation on when to claim.
How the yearly raise is set
Since 1975 the raises have been automatic cost-of-living adjustments, or COLAs13. Each one is the rise in the CPI-W, a price index for urban wage earners and clerical workers, from July-September of last year to July-September of this year, and it shows up in checks from January13.
On October 14, 2026, SSA announced a COLA of 3.6% for 202714. SSA estimates the average retired worker’s benefit goes from $2,095 to $2,170 a month, a raise of $7514. Our Social Security COLA calculator works out the raise for any benefit.
The biggest COLA ever was 14.3% in 1980, and 8.7% in 2023 was the largest since 198115. In 2010, 2011 and 2016 there was no raise at all15.
The government also publishes a research price index for Americans 62 and older, but it is not used to set the COLA16.
Why the raise feels smaller
For people on Medicare, the Part B premium is taken out of the Social Security payment automatically17. In 2026 the standard premium rose $17.90 a month, from $185.00 to $202.9018. That was about 32% of the average retiree’s $56 raise, leaving about $3818.
For 2027 the Medicare Trustees estimate a premium of $209.50, up $6.6019. That would be about 9% of the average $75 raise, leaving about $6819. It is an estimate until CMS announces the official premium, usually in November19.
Taxes can take a share too. Since 1984, up to half of benefits can be taxed once income passes $25,000 for a single person or $32,000 for a married couple, and a 1993 law added up to 85% above $34,000 and $44,00020. Those lines were never raised for inflation: $25,000 in 1984 is about $80,600 in today’s prices20. About 10% of people receiving benefits owed tax on them at first, and 18% by 199320.
The short version
Social Security moves money from today’s workers to today’s retirees, and there are fewer workers for each retiree every decade6. The yearly raise follows prices13. But the Medicare premium comes out of the same check, so the raise you see is smaller than the raise you get18,17.
