Simulator Social Security United States

Social Security is the American public retirement system, created in 1935. It works on a pay-as-you-go basis: FICA (Federal Insurance Contributions Act) payroll taxes from current workers fund benefits for retirees.

• FICA contributions: 6.2% of salary for the employee + 6.2% for the employer = 12.4% total. 2026 cap: $184,500 of taxable wages.
• Trust Fund: Contributions feed the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays out benefits.
• Pay-as-you-go: Unlike a funded system, money is not saved individually. Today's contributions pay for today's retirees.
• COLA: Benefits are adjusted each year based on the cost of living (Cost-of-Living Adjustment), using the CPI-W index.

The Social Security benefit calculation relies on two key concepts:

• AIME (Average Indexed Monthly Earnings): Monthly average of your best 35 years of earnings, indexed for inflation. If you worked less than 35 years, $0 years are included in the calculation.
• Bend points (2026): $1,286 and $7,749. These thresholds are adjusted each year. The progressive formula favors lower earners with a higher replacement rate.
• PIA: This is the monthly amount you receive if you retire exactly at Full Retirement Age. Retiring before or after adjusts this amount.

The age at which you start receiving benefits has a major impact on the amount:

To be eligible for Social Security benefits, you must accumulate 40 credits, approximately 10 years of work.

• 4 credits maximum per year: You earn 1 credit for every $1,890 of earnings in 2026.
• Threshold adjusted annually: The amount required per credit increases each year with inflation.
• Non-refundable: Credits you have accumulated are never lost, even if you stop working.
• No direct impact on the amount: Credits only determine eligibility. The amount depends on the AIME (best 35 years).

The Social Security Trust Fund faces long-term funding challenges that fuel a major political debate in the United States.

• Projected depletion around 2033-2035: According to the annual Trustees report, Trust Fund reserves could be exhausted by the mid-2030s.
• After depletion: Benefits would not disappear but would be reduced to about 77-80% of promised amounts, funded solely by current payroll taxes.
• Structural causes: Aging population (Baby Boomers), declining worker-to-retiree ratio (from 3.3 in 2007 to ~2.7 in 2024), rising life expectancy.
• Solutions being debated: Raising the retirement age, increasing the contribution cap, raising the FICA rate, means-testing benefits, immigration to expand the contributor base.

The WEP is a rule that can reduce your Social Security benefit if you also receive a pension from employment not covered by Social Security (foreign government, certain U.S. public sector jobs).

• Who is affected: People who worked in a job covered by Social Security AND in a non-covered job (foreign pension, government pension from certain states).
• How it works: The 90% factor on the first bracket of AIME is reduced (down to 40%), which lowers the PIA.
• Exceptions: WEP does not apply if you have 30+ years of "substantial earnings" covered by Social Security. The reduction phases out between 20 and 30 years.
• Cap: The WEP reduction cannot exceed half of your non-covered pension.

Advice for expatriates: If you worked in France or another country before contributing to the U.S. system, check the WEP's impact on your benefit. Bilateral social security agreements (Totalization Agreements) can help coordinate contribution periods between countries.