Social Security credits are based on the amount of your earnings. According to SSA.gov, they are the “building blocks” of the Social Security system.
You will need a minimum number of credits to qualify for each type of Social Security benefit. It’s just like in Frosty the Snowman, when Karen asks the ticket master to purchase a ticket, and he says, “No money, no tickets.” In this case, it’s: “No credits, no benefits.”
How Do I Earn My Credits?
You qualify for credits when you have a job, have earned income, and pay Social Security taxes. In 2016, you will receive one credit for each $1,260 of earnings. In 2017, you will receive one credit for each $1,300 of earnings. For a maximum of four credits per year, in 2016 you need to have $5,040 in earned income; in 2017, the number increases to $5,200.
Most people during their lifetime will have no problem earning the required credits for retirement, disability, and/or survivors benefits.
For more on calculating and understanding how much you will qualify for at full retirement age, please read my other article, How to Accurately Calculate Your Primary Insurance Amount | Rules You Should Know.
For more information on your full retirement age, you guessed it, I have another article on that too: The Basics: Full Retirement Age and Social Security.
There are special circumstances. If you are or were in the military: first, thank you for your service; second, you earn credits the same way as civilians do, except you may also qualify for additional benefits. For more information, I suggest reading the Military Service and Social Security publication from the Social Security website.
In addition to the military, there are special rules for household workers, farm work, or if you work for a church or a church-controlled organization that does not pay Social Security taxes.
Not every employee or worker is covered by Social Security. Here are a few examples:
- Federal employees hired before 1948.
- Railroad employees with a tenure longer than 10 years.
- State and local government employees.
What if I Change Jobs? Do I Lose My Credits?
Nope, you get to keep them. That is a good thing because the Bureau of Labor Statistics examined people born in the years 1957 to 1964 and they held an average of 11.7 jobs. The days of going to work for one company for over 30 years, like my dad, are long gone!
How Many Credits Do I Need?
Great question. Of course, it is not one simple answer — that would be too easy. The type of benefit depends on your age. I am going to make it easy for you, however, by breaking it down by retirement benefits, disability benefits, survivors benefits, and Medicare benefits.
According to SSA.gov, if you were born in 1929 or later you will need 10 years of work or 40 credits to qualify for retirement benefits. Remember, you can only accumulate four credits per year, that is why you need a minimum of 10 years.
If you were born before 1929, and you are reading my blog, please email me — I would love to chat! Back to the topic: if you were born before 1929, you would need fewer years of work. For example, if you were born in 1928, you would need 39 credits. You would need 38 credits if you were born in 1927, 37 credits if you were born in 1926, and so on . . . .
The key factor in determining how many credits you need to qualify for disability credits depends on the age you become disabled. Here are the rules according to SSA.gov:
- Before age 24, you will need to have accumulated six credits in the three-year period ending when you become disabled.
- During age 24 to 31, you will need to have to accumulated 12 credits when you became disabled.
- During age 31 or when older, please refer to the chart below courtesy of SSA.gov website:
In order for your family to qualify for benefits in the event of your death, it is going to depend on what age you die. The younger you are, the less credits you will need, and the most you will need is 40 credits. For example, as we discussed in the beginning of the article, the most you can earn is four credits per year. 10 years of work times four credits per year = 40 credits. For more on survivors benefits, please read my other article, How to Navigate the Maze of Social Security Survivors Benefits.
Many do not think of Medicare as a Social Security program, but it is. I know I don’t automatically think of Medicare when I am discussing Social Security programs. In fact, the Social Security credits you accumulate also count toward Medicare when you reach age 65 or earlier if you qualify for 24 months or more of disability benefits.
Additionally, if you want a comprehensive review, please take a look at our Social Security Solution Program. I put this program together from the feedback I have received from clients and readers of Social Security Teacher. This solution is designed specifically for those of you who want help and guidance in making the best decision for you and your family. I am a CERTIFIED FINANCIAL PLANNER™ professional, and have the experience to help you get there.