The U.S. Federal Government expects to spend $1,400,000,000,000.00 on Social Security in 2025. This represents 20% of all Federal spending in 2025.
Social Security is a federal program that provides financial support to retirees, individuals with disabilities, and the families of deceased workers. Established in 1935, it serves as a social insurance system, offering a safety net for millions of Americans. Benefits are paid monthly and are categorized into retirement, disability, survivors, and Supplemental Security Income (SSI) programs. It is the largest federal program by spending, designed to ensure income stability for eligible individuals throughout various stages of life.
The program is primarily funded through payroll taxes collected under the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act (SECA). Workers and employers each contribute 6.2% of wages, up to an annual earnings cap, while self-employed individuals pay the full 12.4%. These taxes are deposited into two dedicated trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. In addition to payroll taxes, Social Security receives income from interest on trust fund reserves and, in some cases, taxation of Social Security benefits for higher-income recipients.
Social Security is part of the federal government's mandatory spending, meaning its funding does not require annual approval by Congress. Instead, it operates on a pay-as-you-go basis, where incoming payroll taxes and trust fund reserves are used to pay current beneficiaries. In fiscal year 2023, Social Security expenditures totaled approximately $1.3 trillion, accounting for 20-25% of the federal budget and about 5% of GDP. Each year, the Social Security Administration estimates its required spending based on projected beneficiaries, wage growth, and demographic trends, ensuring the program can meet its obligations. However, with expenditures outpacing revenues in recent years, the trust funds are projected to be depleted by 2034 without reforms, making future budget planning a critical issue.
