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Your 35 years of earnings is what determines you social security benefit, not the taxes paid. Here is why.
✔️ Your benefits are paid for life and perhaps to a survivor. Your benefits don’t stop when you have received all you paid in FICA taxes – roughly after collecting benefits for 6 years.
✔️ The SSA averages your highest 35-years of earnings and then adjusts them to reflect the growth in wages using the AWI – average wage index. These adjusted wages are used to calculate your benefits. You paid taxes on the lower actual wages earned over 35 years but your taxes are not adjusted.
✔️ Millions of people receive SS benefits as dependents or spouses never having paid a penny in FICA taxes. There is no exact number, but estimates run between 5-8 million. At least 3 million are minor children who never worked.
✔️ Two workers may have the identical earnings history and paid identical FICA taxes. One could marry and receive 50% more in benefits for the new spouse. You only need to be married for one year before your wife can claim on your record. But if the spouse is the mother of your child, not even the one year applies.
✔️ Both a divorced spouse (after being married at least 10 years) and simultaneously a current spouse can collect benefits based on the workers earnings record.
✔️ Social Security provides annual COLA adjustments and those increased benefits have nothing to do with past earnings, but rather the benefits you are collecting.
There’s a historical context to this, of course. SS was the solution to a problem nearly 100 years ago. Epic poverty and unemployment during the Depression, widespread failure of banks and financial institutions, and little personal wealth in the form of home ownership or investments. SS was intended to provide a basic income for the elderly who had little and, as RDQ often points out, had a much shorter life expectancy than today. Is it any wonder that the system set up in the 1930s (tweaked occasionally, but not fundamentally, since then) isn’t quite fit for purpose today?
Same argument is made on this site about health care. Our employer-focused health insurance system had its genesis in the price control systems of the 1940s economy. Save for periodic lurches (Medicare for over-65s, Medicaid for low income, ACA for a wide swath not eligible for other coverage), the system reflects its origin rather than today’s needs.
I agree that our political system – or our markets – should provide a better solution. I also doubt that they will, be it for political reasons, polarization, or distrust of institutions. Perhaps I’ll go back to the car-buying post on another HD page now. . . .
Agree! All the fixes are band aids on a too old system. It really needs a thorough overhaul. Doubt that will happen, so in the meantime I’ll go with “take what’s given.”
Who paid for my SSA benefit. I did. I started drawing SSA at age 70 but worked, and paid into SSA to age 75, I will never live long enough to receive benefits equal to the time adjusted value of the amounts my employer and I paid into SSA. I expect that is true for most Humbledollar readers. All of us who did are blessed to have it be so and glad to support folks who weren’t fortunate enought to have satisfying work and good income.
That was your choice. I retired at 67 16 years ago.
After six years I had collected all I paid into SS since 1959. If we count my wife’s benefits on my earnings we have collected all employer taxes as well. Now after 16 years with all the COLAs, we hare collected many multiples of the total taxes paid.
….and therein lies part of the problem with S.S. While those were the rules of the game when most of us contributed to the system ( therefore you were due that lifetime “income assurance”, no issue there); it is not sustainable to have future high lifetime income retirees become a drain on the system beyond what they have contributed.
A lifetime cap needs to be placed on benefits for people at or near the maximum S.S. recipient levels in the future. Naturally the cap should have some time value of money factored in vs just the number of dollars contributed over the years. If that future cap or some “opt out” diminished payout is in place by the time I turn 70 fine by me, I’ll sleep better.
Things need to be restructured so that in the future, those with the means should be fountains, not drains to help sustain the system.
i wouldnt brag about all the dollars your wife collected while she contributed very little to the system. Every week, I see older married women — some of whom sit on their walkers— who work as cashiers at Walmart to pay for those benefits.
And a number of elderly never married women (and men) who never made a high income. I bristle when people say ” they should have saved more”. As my mother used to say ” There but for the grace of God go I”
Not sure what one has to do with the other. I was just pointing out that millions of people receive benefits in excess of taxes paid or not having paid at all. I suspect those women need the income. Why is the real question and problem.
They do need the income but every dollar they earn is subject to SS tax, and that money goes directly to SS beneficiaries—including spouses who never paid into the fund.
We are living in 2026 not 1966. It might be time to eliminate the spousal benefit.
It wouldn’t even have to be eliminated. Given data analytics today, it would be possible to track via tax returns spouses, young children, disabled children household income etc. SS tax could be modified to account for various life circumstances. There’s no need for one size fits all these days.
Actually, you got the order of operations backwards. First, they adjust your earnings history using the AWI and then they computed the average.
See the example here Social Security Retirement Benefit Calculation
Your right I did get it backwards and there would be a big difference too.
I believe I read that in the 1983 SS reboot Congress set the goal of capturing 90% of earnings under SS … There are way too many people making over the 184,500 cap today. Seems like it has to go up
Only 6% earn over the cap and it’s been pretty steady since the 1980s.
https://www.nytimes.com/2026/06/23/opinion/moreno-warren-social-security.html?smid=url-share
These 2 have the right idea …
A generation is 75 years neither change extends SS solvency anywhere near that.
This article is behind a paywall…
Regardless, the income earned over the cap may be 100% or so on those 6% of individuals.
1983: Congress set the system so that 90% of covered earnings were subject to the Social Security payroll tax.
Today: Only 82–83% of covered earnings are subject to the tax because earnings above the wage cap have grown much faster than average wages.
From the Congressional Budget Office
Which also means those earnings do not produce any benefits for the individual or create any liability for SS.
SS was intended to be limited in the benefits provided and taxed accordingly.
It’s time to move away from that initial intent in order to save SS while remaining fair.
Actually, if you eliminate or substantially raise the income limit for SS taxes, “fair” would require you to factor those higher taxed wages into the benefit calculation accordingly to avoid Soc Sec becoming an even greater wealth redistribution program.
If we didn’t, who did? The taxes taken from paychecks were anything but voluntary.
It is no secret that if Congress wanted the problem fixed, it would have been fixed already.
Is there anyone reading HD who doesn’t understand that everything, everyone in Congress does is to maintain their position, in power?
I am personally wary and weary of those bad-mouthing a system because those involved in it use the rules established by Congress to maximize their benefits.
The public didn’t devise the Social Security Ponzi scheme; Congress did, for votes.
The public didn’t demand that non-contributors be included in the scheme; Congress included them for votes.
The problems with Social Security are not caused by the beneficiaries; they are caused by Congressional greed and lust for power.
My father served in the US military for 30+ years and died at age 53 from a service-connected illness, never having collected a penny of his Social Security benefit. How many 100s of 1000s of Americans did the same? Where did their benefits go?
Rather than begrudge Social Security recipients the benefits they paid for, reform the program and eliminate the parts that were specifically created by Congress to buy votes and return the program to its intended purpose.
Or just let it go!
Not sure what you are reaction “If we didn’t, who did?” is about. the piece is educating, not complaining.
Which parts are you referring to?
100% agree.
Your post is sadly inaccurate and misleading. You obviously have no understanding how funding works or how demographics affect all types of pensions or social security which is a giant insurance program with the risks, winners and losers as any insurance. You should ask where the money came from to pay my benefits for the last 17 years which far exceeds all taxes paid.
Perhaps before you spew insults and display your personal ignorance, you should inquire about the credentials I have to make my assertions.
Based on prior posts, I determined that you have a background in pensions, so I understand the perspectives you bring to Social Security and other Federal Benefits programs. I have a 58-year career in financial services, including 15 years of collegiate teaching experience in Financial Planning and Retirement Planning, covering all aspects of Social Security, Medicare, and Medicaid.
My post is 100% accurate, and the only thing misleading is your insults.
You and I both know exactly where your 17 years of benefits came from. They are the result of interest earned and the benefits that inured to the SS Program because of people like my father, who, after working a lifetime and contributing to the SS system, died without collecting a penny of their benefits. Social Security is often referred to as a Social Insurance program, and although I personally believe it is more accurately described as “Ponzi Scheme adjacent,” as an insurance program, it operates using the foundational principles of insurance, including the use of benefits not collected by others who die prematurely, to benefit those, like you, living longer than the anticipated averages used by the actuaries.
I repeat my contention that IF Congress wanted this issue resolved, it would have done so already. Instead, they prefer to retain this issue as a wedge between generations and age cohorts, sowing division. This allows them to mask their disdain for the 100% of the population who are not themselves, in order to use the issue as a cudgel, with which to bash the opposing political party every two years.
Once again, these are my opinions, so I am not seeking your agreement or approval.
Why did you ask “Where did their benefits go?” If you know how pensions and SS work you surely know the answer.
To put it another way which you also know, they were an actuarial gain for the trust
That is correct, as I pointed out in my second post.
You called it actuarial gain…I called it “interest earned and the benefits that inured to the SS Program because of people like my father, who, after working a lifetime and contributing to the SS system, died without collecting a penny of their benefits.”
What about the survivor benefits built into the system? Millions of families benefit from them.
i don’t spend much time worrying about SS, but I do wonder if any of the proposed fixes simply are efforts to maintain an out of date system based on 1930s family structure and pre-computer technology. One example: Spouses who cannot qualify for benefits on their own work history today
qualify for 50% their spouses’ benefit. Why? The spouse never paid extra for this benefit, and 50% is an arbitrary amount that has no relationship to spousal need. Doesn’t today’s technology provide a better way to collect SS tax related to whether a non working spouse is present and provide payments in better way than one spouse getting 50% of very little while another gets 50% of a much larger number?
Only if you want Social Security to become a welfare program, which it is not today (nor should it be, I believe).
Two pre-requisite words regarding Congress (which has EVERYTHING to do with this tiresome topic): “Term Limits”. Only then will subjectivity and creativity have a fighting chance on such a “risky” topic for elected officials.
Meanwhile, sad to say, any commentary or hopeful letter writing on the S.S. topic is like screaming into a tornado and expecting to be heard.
RDQ for Congress?
Term limits are in effect. It’s called voting.
I am glad (albeit a bit surprised) that you have faith in an informed electorate.
I am less optimistic in this regard. In my view, humans are driven by incentives. The incentives for the Congress (and at the corresponding state and city levels without term limits) are skewed away from making the often unpopular choices that have the long term interests of the country (state, city) at the forefront of their mind. Far too much energy is directed at getting re-elected and remaining in the role as a “career” vs actually doing the work. If for example there were two terms allowed; the second term in particular would be devoid of re-election distractions. There would be incentive to actually get something done in a limited remaining time before returning to the general population…a population that would still be relatively familiar after only a few years away.
Oh and by the way, maybe with term limits the spectre of eliminating Congressional pensions would be considered….you know lead by example….so that eventually for the good of the country all Federal Employees would join the vast majority of those they “serve” in relying on 401K or 401K -like retirement plans.
Have you done an analysis of what the money you and your employer paid into SS would have earned invested in Vanguard’s SP500 index? Over a long work career that would be far more than the actual amount paid in.
Have you done an analysis of what the money you and your employer paid into SS would have earned invested in Vanguard’s SP500 index?
I have;
https://humbledollar.com/forum/theyre-right-im-wrong-sort-of/
Dan:
I asked Claude AI this question: If I had taken my FICA taxes plus my employer’s contributions from my age 16, in 1967 and invested it outside the Social Security system, until I retired, in January 2024, what would it have grown to?
Then the answer, using the average US wage each year, was $5,134,682, based on FICA taxes of $237,017. That would produce an income of $17,116 monthly. Interestingly, my records show that I contributed $199,051 and my employers contributed $210,336 over my 58-year career…for a total of $358,765. My 2026 SS benefit is $4,821.90 per month.
Now, obviously, that isn’t the real world, and it doesn’t account for life events that may have altered the numbers, but the idea is interesting. There is no doubt that a person COULD do better on their own, in the market…BUT would they have the discipline to follow through?
Behavioral Science tells us the answer…ABSOLUTELY, POSITIVELY NO WAY!
I also shared this factoid with my kids… 59,95% ($2,538,484) of my lifetime earnings ($ 4,233,830) were earned over 15 years of the 58-year period. 14 of those 15 years were at the end of my working career.
Well, inaction has consequences, does it not? If you don’t save, you don’t have money to spend. It’s called self-reliance. Kind of an American thing.
That’s my conclusion as well, Mike.
Went and read your post. Very interesting. Thanks!
Thanks for sharing. I would argue the employer contribution should count too. If the system was setup so that it was mandatory, the employer would have to contribute and not touch the employee’s fund.
I asked an AI program
“If I saved weekly an amount equal to my and my employer’s SS payroll taxes always at the taxable wage cap and earning a 8% annual return from 1959 to 2010 (my working years) how much could I accumulate?
The answer was $1.07 million. Of course, always at the wage cap is quite unrealistic and nothing is certain.
I’ll take a life certain annuity with survivor benefits any time.
That’s theoretical, but a practical myth given all SS provides beyond the workers retirement income and what can happen during 40 years.
I appreciate Mr. Quinn keeping this topic in front of us. It appears the only way something positive will happen is either through the election process or by some massive grassroots campaign of contacting representatives and senators to request action be taken sooner rather than later. I have very little faith that the election process will have any significant effect, so appreciate these posts which provide me with information to use when I write my letters.
Social Security is one item where Donald Trump has kept his word – He will not touch Social Security. Instead, he intends to let it collapse on itself.
I doubt if Congress will allow it. It would be a strange thing for
members of the House and Senate to jeopardize their own jobs and mess with this entitlement.
With all due respect, I’m tired of reading about SS. Our non functioning Congress will either fix it or not.
I agree. RDQ, isn’t it time to move on?
This isn’t about Congress, it’s about people making decisions and supporting policies based on false information.
How many of those people are HD readers?? I think you’re preaching to the choir, and agree it’s all been said.
I share all the posts on the social media links on HD. I assume that is their purpose- to reach beyond regular readers and stimulate more interest.
There is so much false information out there so what can you do? This problem will only be fixed by those that are elected and hopefully they are educated and want the best for their constituents.
Good one!!