Understanding Social Security Credits and Their Impact on Your Future Benefits

You may not realize it, but each year you work and pay into the Social Security system, you accrue Social Security credits. The Social Security Administration (SSA) then uses these credits, along with your age, to determine your eligibility for various types of benefits.

What Are Social Security Credits?

When you file a claim for Social Security benefits, the SSA determines if you’re eligible in part based on your credits or your spouse’s credits (along with your age). Credits don’t impact the amount of benefits—that’s based on your earnings. These credits determine only if you qualify to receive benefits such as retirement, disability, Medicare, or survivorship benefits for your family. Credits aren’t required for Supplemental Security Income (SSI), a government program providing financial support to those with few or no resources who meet certain conditions.

How Do You Earn Social Security Credits?

You earn credits by working and paying Social Security taxes, regardless of whether you’re self-employed or employed full-time or part-time. You can earn up to four credits each year, essentially one per quarter. Each credit is based on a monetary amount of earnings; for 2024, every $1,730 earned equals a credit. If you earn $6,920 in the year, you’ll hit the maximum of four credits. That number typically goes up slightly each year as average wages rise; for example, each credit took $90 less to earn in 2023.

Your credits stay on your record forever, even if you leave the workforce for a while or have a career change. All that matters is you have at least 40 credits banked by the time you want to start taking Social Security.

How to Find Out How Many Credits You Have

To see how many credits you’ve amassed, the easiest method is to create an online account on the SSA’s website and view your statement. You can also call the SSA at 800-772-1213.

Not all work counts toward Social Security. Some employees of state and local governments might not participate, and federal employees hired before 1984 don’t either. Some states and school districts don’t allow public school teachers to participate in Social Security, instead offering a pension program. There are also some special rules about credits for certain types of work, such as domestic work, farm work, and nonprofits that don’t pay SSA taxes.

What if you don’t have enough Social Security credits? Unfortunately, that means the SSA will not pay you any benefits.

How Do Social Security Credits Affect Future Benefits?

The minimum amount of Social Security credits you need to earn benefits varies by the type of benefit and your age. That said, no Social Security benefit requires more than 40 credits.

Retirement Benefits

To be eligible for Social Security retirement benefits, you must earn at least 40 credits in your lifetime. Since you can earn up to four credits a year, that’s doable in 10 years of working.

Remember that you aren’t eligible for some benefits, such as retirement, until you reach a certain age. But even if you haven’t earned enough credits, you may still be eligible for Social Security retirement benefits through your current or former spouse’s work history.

Disability Benefits

Social Security credits are also used to determine disability benefits. However, for Social Security Disability Insurance (SSDI), the amount of credits required is based on the age at which you developed a disability:

• If your disability developed before age 24, you need to have earned at least six credits in the prior three years.
• If you’re between ages 24 and 31, you need credits equivalent to working half the time between when you were 21 and when your disability started.
• If your disability started at age 31 or older, you’re required to have a minimum of 20 credits from the prior 10 years.

Survivors Benefits

If you pass away, your immediate family members may be eligible for Social Security survivors benefits payments. The amount of credits or working years required depends on your age when you pass away, with younger workers requiring fewer credits and older workers needing more.

Very young workers who pass away may only need to have worked for 18 months (six credits) in the years preceding death. However, older workers may need to have had 10 years, or 40 credits, for their surviving family members to receive benefits.

Certain survivors benefits have exceptions and don’t require the full amount. For example, minor children, and spouses caring for minor children, can get benefits as long as you have six credits earned from the three years prior to your death.

Another rule to be aware of is that, if you pass away while already receiving retirement or disability benefits from Social Security, your credits don’t come into play again. Instead, your family’s survivor benefits will be based on your existing Social Security entitlement.

Medicare

Another way the federal government uses Social Security credits is to determine your eligibility for Medicare, the subsidized health insurance program for Americans age 65 or over (though some with severe disabilities may be eligible earlier).

Once you or your spouse reach 40 Social Security credits from working, you’re likely eligible for Medicare and won’t have to pay premiums for Part A (hospital insurance). If you don’t have enough credits, you may be able to still get this coverage, but at a cost.

How to Maximize Social Security Credits

The ins and outs of Social Security rules can be confusing, but this concept is simple: Credits don’t determine how much you receive in retirement. Meeting the magic number of 40 credits simply makes you eligible to receive those government benefits.

The only way to earn credits, whether for your retirement, disability, or survivors benefits, is by working and paying Social Security taxes. Those who work consistently for at least 10 years should have no problem reaching the minimum. But if you took long periods off work or were in a job that treats Social Security differently, it’s smart to log in to or make an account on the SSA’s website and see where your credit total stands.

When it comes to how much you’ll get, benefit payments for retirement are calculated based on your highest 35 years of wages. Those who worked less than 35 years, or had years with no earnings, get lower payments. So there’s really no reason to shoot for 40 credits quickly, unless you absolutely must take Social Security as soon as you’re at an eligible age. Additionally, there’s no benefit to earning more than 40 credits.

Be aware that delaying taking Social Security retirement benefits increases your monthly payments, so if you can afford to wait several years past the minimum age, you’ll get bigger checks. The month you choose to start receiving benefits can also make an impact.

If your retirement savings are slim and you will depend on Social Security payments, start checking your credit balance well before leaving the workforce since it can impact your retirement timing and Medicare eligibility. You may realize you need to work a little longer than expected, or if you work part-time, pick up some more shifts to hit that year’s threshold for earning credits.

If you have questions on your situation, visit your local Social Security office or contact the SSA.

Prepare for Retirement Elsewhere

Monthly Social Security checks can be a critical way to support yourself during retirement, but know that it’s only meant to replace part of your income. How much it replaces depends on your wages and your age when you start taking benefits, but it shouldn’t be solely relied upon for living on in your golden years—especially as concerns mount about Social Security funding eventually running out as Baby Boomers age, potentially leaving younger generations with smaller payouts.

In other words, Social Security can be part of your retirement plan, and it’s absolutely worth tracking your credits and ensuring you get to 40. But Social Security shouldn’t be relied on as your only means of income after your working years. As early in life as you can, it’s ideal to keep debt in check and save for retirement in investment accounts like 401(k)s and IRAs so you can live comfortably when you stop working.

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