How many work credits do i need for social security

 The 2023 Social Security increase will have retirees seeing 8.7% more income, but those preparing to retire might not make the cut to qualify for this benefit. Social Security is an earned perk of being an American taxpayer, but to earn eligibility you have to submit to a “credit system.” Much like passing a class to receive credit towards graduation, retirees must earn 40 credits in their working years to qualify for Social Security benefits. But with the 8.7% increase, earning those 40 credits just got more complicated.

For assistance sorting out your retirement plans and how Social Security fits into it, consider working with a financial advisor.

The History of Social Security Credits

The process of earning credits toward Social Security has been at play since 1978. It was the government’s way of only allowing contributing taxpayers to reap the benefits. There are three classifications of recipients, and all have a different required credit threshold: retirement recipients, disability recipients and those receiving survivor benefits.

Retirees: Require the full 40 credits to qualify
Disabled recipients: Require 6 – 20 credits depending on age
Survivors: Require 6 credits

How Do You Earn Social Security Credits?

You earn Social Security credits by working and paying Social Security taxes. When you receive a paycheck your employer is required to supply a pay stub. A pay stub acts as an itemized breakdown of your earnings and deductions such as your total hours worked and expenses like health insurance. Social Security taxes are a mandatory deduction that’s factored into your pay expenses.

To retire and receive Social Security benefits, you need at least 40 credits.You are only allowed to earn four credits max per year, so the 40 credits represents 10 years.  Credits are earned based on your annual income so some may earn their four credits relatively quick while others may have to work more to hit their target.

How Much Do I Have To Earn To Receive A Single Credit?

In 2023 you will need to earn $1,640 for a single credit, totaling $6,560 for the maximum four credits. This rate changes yearly depending on Social Security benefit increases. Since there was an 8.7% increase this year, 2023 will see a significant jump of $130 to earn a single credit.

To put it into perspective, other increases in previous years have been much smaller, averaging $40 to $60.

The Bottom Line

Those who have already earned their 40 credits need not worry; your finish line hasn’t moved. But anyone who is within ten years of retirement with little to no work experience will need to be aware of their earnings and credits moving forward.

If you are unsure about where you may stand with your credits, visit The Social Security Administration website and create a personal “my Social Security account.”

Social Security Administration issues monthly Social Security Disability (SSD) payments to individuals ages 18 and over who meet the medical criteria for disability and who have earned the required number of work credits in the required period of time. One work credit is earned for each three month period worked in a job covered by Social Security. The required number of credits and the required period of time are dependent on a person’s age.

Examples of requirements for different ages:
Before age 24 – must have 6 credits earned in the 3-year period ending when your disability starts.
Ages 24-30 – must have credit for working half the time between age 21 and the time you become disabled. For example, if you become disabled at age 27, you would need credit for 3 years of work (12 credits) out of the past 6 years (between ages 21 and 27).
Ages 31 and older – see chart.

Born after 1929 – Disabled at Age

(from Social Security website, http://www.socialsecurity.gov/retire2/credits3.htm)

Medicare and Social Security Disability (SSD)
People receiving SSD must wait two years before becoming eligible for Medicare.

The following Consumer Financial Protection Bureau (CFPB) “Focus on People with Disabilities” guide contains tips, information, tools, and skill-building resources for people with disabilities.  The following topics are discussed.

Does everyone get Social Security? No. Still, American workers who will not qualify for Social Security retirement benefits are relatively rare. If you are one of them, it’s important to know, so you can secure other sources of income or determine whether it’s possible for you to become eligible. What follows are the eight most common categories of workers who lack Social Security eligibility and thus are not entitled to benefits.

Key Takeaways

• Some American workers do not qualify for Social Security retirement benefits.
• Workers who don't accrue the requisite 40 credits (roughly 10 years of employment) are not eligible for Social Security.
• Some government and railroad employees are not eligible for Social Security.
• American expatriates retiring in certain countries—and some retired immigrants to the U.S.—can't collect Social Security benefits.
• Divorced spouses married for fewer than 10 years cannot claim benefits based on the earnings of their ex-spouse.

1. Workers With Too Few Social Security Credits

Can you get Social Security if you never worked? No, because a minimum requirement to collect Social Security retirement benefits is performing enough work. The Social Security Administration (SSA) defines enough work as earning 40 Social Security credits. More specifically, in 2022, an individual receives one credit for each $1,510 in income, and they can earn a maximum of four credits per year. So, 40 credits are roughly equal to 10 years of work.

If you earn the federal minimum wage of $7.25 an hour, then you’ll need 208.28 hours of work to receive one credit toward Social Security. By working just 17 hours a week for 50 weeks at this wage (allowing yourself a two-week vacation), you can earn the maximum credits per year. That means even those who work part-time so they can attend school or care for a child—or those who work part-time because they cannot find full-time work—can amass Social Security credits without too much trouble.

Earned credits are accrued over a person's lifetime and never expire, so anyone who has left the workforce with close to 40 credits might consider going back and doing the minimum additional work they need to qualify. You can check the number of credits you have so far by opening a Social Security account on the Social Security website and downloading your Social Security statement.

2. Workers Who Die Before Age 62

The minimum age to start claiming Social Security retirement benefits is 62. If someone dies prematurely, then dependent children and spouses may be entitled to survivor benefits. At age 60, for example, widows and widowers can begin receiving Social Security benefits based on their deceased spouse’s earnings record (disabled spouses can start at age 50). Terminally ill patients can apply for Social Security Disability Insurance (SSDI), which means they will still receive some benefit from their contributions to the system.

What if you are terminally ill and reach the minimum retirement age? If you are single, claiming right away may be the most sensible strategy. However, if you have a spouse, postponing may provide your spouse with greater benefits. The spousal benefit can be as much as 50% of the worker's benefit, depending on the spouse's age at retirement and if the spouse is eligible for retirement benefits based on their own earnings record. The Social Security Administration has an online calculator that helps determine benefits for spouses.

If you do not qualify for Social Security payments, you need to ensure that you have sufficient income to support your lifestyle in retirement.

3. Certain Divorced Spouses

Divorced people can be entitled to collect Social Security benefits based on the earnings of an ex-spouse. Often these are full-time homemakers or stay-at-home parents who didn’t work. To get the benefits, they must be single, 62 or older, and have earned less in benefits based on their own work record than that of their ex. If the marriage lasted for fewer than 10 years, they are not eligible to claim any spousal benefits.

4. Workers Who Retire in Certain Foreign Countries

U.S. citizens who travel to—or live in—most foreign countries after they retire usually can receive Social Security benefits. However, if that country is Azerbaijan, Belarus, Cuba, Kazakhstan, Kyrgyzstan, Moldova, North Korea, Tajikistan, Turkmenistan, or Uzbekistan, then the government will not send them Social Security payments. Exceptions may be available in all of these countries except Cuba and North Korea. The government’s Payments Abroad Screening Tool is an easy way to check if you will be able to continue receiving Social Security benefits while living abroad or if restrictions will apply.

5. Certain Noncitizens

Certain noncitizens who have earned 40 Social Security work credits in the United States are eligible to receive Supplemental Security Income (SSI) benefits. Immigrants who do not have enough U.S. credits but who come from one of the 30 countries with whom the United States has Social Security agreements, also known as “totalization agreements,” may qualify to receive prorated benefits.

These benefits are based on their work credits earned abroad combined with their U.S. work credits, an arrangement that is particularly helpful for older immigrants who are not likely to accumulate 10 years of work in the United States before retiring. Workers who have not earned at least six U.S. credits, however, cannot receive payments under totalization agreements.

6. Certain Government and Railroad Employees

There are some jobs that don’t pay into Social Security. Federal government employees hired before 1984 are included in the Civil Service Retirement System (CSRS), which provides retirement, disability, and survivor benefits. These workers did not have Social Security taxes deducted from their paychecks and thus are not eligible to receive Social Security benefits.

They may still qualify if they have earned benefits through another job or a spouse. However, in these cases, CSRS pension payments may reduce Social Security payouts. Government workers who are covered by the Federal Employees Retirement System (FERS), which replaced CSRS, are eligible for Social Security benefits. 

Most state and local employees have Social Security protection under a federal Section 218 agreement. However, some of these workers—including those who work for a public school system, college, or university—will not receive Social Security benefits if they do not pay Social Security taxes. They generally receive pension benefits from their employers.

Railroad Employees

Some railroad employees are not covered by Social Security. Workers with at least 10 years of service in the railroad industry (or at least five years after 1995) have their retirement benefits covered through the Railroad Retirement Board. The RRB is an independent federal agency that administers various employment benefits for railroad industry employees and their families.

Workers with fewer than 10 years of service in the railroad industry (or fewer than five years after 1995) do not receive retirement benefits through the RRB. Instead, their accounts are transferred into Social Security and they become eligible for Social Security benefits after meeting Social Security benefit requirements.

$3,627

The most that someone reaching full retirement age in 2023 can get in Social Security benefits per month.

7. Self-Employed Tax Evaders

Self-employed workers pay self-employment tax to cover both their own and the employer’s portion of Social Security contributions. The tax is calculated and paid each year when self-employed workers file their federal tax returns. Those who do not file tax returns do not pay Social Security taxes, unlike employees whose employers withhold and remit their Social Security taxes from each paycheck.

If you have no record of paying into the system, you will not receive payouts. If you have not reported income and evaded taxes for a lifetime, then you have no right to Social Security benefits.

8. Certain Immigrants Over Age 65

Retired people who immigrate to the United States will not have the 40 U.S. work credits that they need to qualify for Social Security benefits. One way to rectify this problem is to earn six work credits in the United States and receive prorated U.S. benefits combined with prorated benefits from their former country under a totalization agreement. This solution makes sense for workers who also do not have enough benefits in their home country to qualify for that country’s equivalent of Social Security payments.

Older immigrants who do not qualify for U.S. Social Security and whose countries’ laws allow them to receive benefit payments while residing abroad can claim their Social Security or pensioner’s benefits while living in the U.S.

The Bottom Line

Almost all retirees in the United States receive Social Security benefits when they stop working—assuming they’ve reached retirement age, of course. However, those who have spent little time in the U.S. workforce, whether due to full-time homemaking or working abroad, may not qualify under their own names. (Some could qualify for spousal benefits if their spouse qualifies for payments.) Some government workers are also not eligible. Fortunately, some people who do not currently qualify can still find a way to do so.