Comprehensive Guide to the Old Age, Survivors, and Disability Insurance (OASDI) Program

Julia Kagan is a seasoned financial and consumer journalist, previously a senior editor specializing in personal finance at Investopedia.

Understanding the Old Age, Survivors, and Disability Insurance (OASDI) Program

The Old Age, Survivors, and Disability Insurance (OASDI) program is the formal designation for Social Security in the U.S., a federal initiative designed to deliver income assistance to retirees, disabled individuals, and their families. This program is funded through payroll taxes collected from workers and their employers.

Its primary mission is to provide partial income replacement for individuals affected by retirement, disability, or the loss of a spouse or qualifying ex-spouse.

Key Highlights

• OASDI is the official name for the Social Security program in the United States, though it is not commonly used in everyday language.
• The program offers financial benefits to retirees, disabled persons, and their eligible family members.
• Funding comes from payroll taxes, known as FICA taxes, shared between employees and employers, with self-employed individuals covering the full amount.
• Social Security payments are calculated based on an individual’s earnings history during their working years.

How the OASDI Program Operates

Established under the Social Security Act signed by President Franklin D. Roosevelt in 1935 during the Great Depression, the OASDI program has evolved significantly alongside the U.S. economy and population growth.

From serving roughly 222,000 beneficiaries with an average monthly payment of $22.60 in 1940, the program now supports millions with an average monthly benefit of $1,976 as of January 2025, adjusted annually for inflation.

OASDI is the largest social insurance program globally and represents the federal government's biggest expenditure, with costs estimated at $1.4 trillion in 2024. Nearly 90% of Americans aged 65 and older receive Social Security benefits.

Benefit amounts are determined by calculating the average indexed monthly earnings (AIME) based on the 35 highest-earning years of the beneficiary’s work history.

Important Update

Social Security benefits will increase by 2.5% in 2025, following a 3.2% cost-of-living adjustment in 2024.

The OASDI Payroll Tax Explained

OASDI benefits are financed through payroll taxes collected under the Federal Insurance Contributions Act (FICA) for employees and the Self-Employed Contributions Act (SECA) for self-employed workers.

The Social Security tax rate is 6.2% for employees and 12.4% for self-employed individuals. When combined with Medicare taxes, total rates reach 7.65% for employees and 15.3% for the self-employed.

Collected funds are deposited into two trust funds:

• The Old-Age and Survivors Insurance (OASI) Trust Fund, which finances retirement benefits
• The Disability Insurance (DI) Trust Fund, which covers disability payments

These funds distribute benefits and invest surplus revenues to maintain program solvency.

Taxable Earnings Cap

There is an annual earnings limit subject to Social Security tax. For 2024, this cap was $168,600 and increased to $176,100 in 2025. Earnings above this threshold are exempt from OASDI taxation.

Eligibility Criteria for OASDI Benefits

To qualify for OASDI benefits, individuals must meet specific requirements. Retirement benefits can begin as early as age 62, but full retirement age varies based on birth year, set at 67 for those born in 1960 or later.

Waiting until age 70 to claim benefits results in higher monthly payments due to delayed retirement credits.

Benefit calculations are based on previous earnings. Survivor benefits support the spouses and dependents of deceased workers, while disability benefits are available to those unable to engage in substantial gainful activity and who meet additional qualifications.

Workers must be fully insured by earning sufficient credits or quarters of coverage, with one credit granted for every $1,810 earned in 2025 (up from $1,730 in 2024). A maximum of four credits can be earned annually, and 40 credits are required to qualify for benefits.

Additional Note

Accumulating 40 credits over a working lifetime is essential for Social Security income eligibility.

Is OASDI Taxation Mandatory?

Yes, federal law mandates that both employees and employers contribute to the OASDI fund through Social Security taxes on earnings up to $176,100 in 2025, increased from $168,600 in 2024.

Taxation of Social Security Benefits by Age

A portion of Social Security benefits may be taxable regardless of age, depending on total income. Individuals earning less than $25,000 annually or couples earning under $32,000 can receive benefits tax-free. Others may pay taxes on up to 85% of their benefits based on income levels.

Exceptions to OASDI Tax Payments

Very few exemptions exist for OASDI taxes, including certain religious clergy and some nonresident aliens, who are also ineligible for Social Security benefits.

Summary

The OASDI program, widely recognized as Social Security, is a federal system providing retirement and disability income benefits. Funded by payroll taxes at 6.2% for employees and 12.4% for self-employed individuals, it plays a critical role in supporting millions of Americans. Benefits are regularly adjusted for inflation to maintain purchasing power, ensuring ongoing financial assistance to retirees and disabled persons.

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