To be eligible for federal programs such as Social Security Disability Insurance (SSDI), survivor and dependent benefits, and Social Security retirement benefits, you must demonstrate that you have earned enough work credits in your Social Security account.
Work credits reflect the taxes you have paid into the system, and therefore your ability to receive benefits. If you are unable to work or are dependent on a working family member, there are other provisions available for you to receive benefits even if you do not have the required work credits.
5 Benefits of Earning Social Security Work Credits
- Social Security Retirement
- Medicare
- Social Security Disability
- Dependent Benefits
- Survivor Benefits
Social Security work credits are necessary to qualify for most Social Security benefit programs. While there is a minimum number of credits required, there are no additional benefits for those who exceed this minimum. However, there are provisions for those who are unable to attain the minimum number of credits due to a disability or medical condition.
Social Security Work Credits
The Social Security Act, first passed in 1935, was created as a way to provide financial support for America’s workers who were struggling during the Great Depression. Initially, the program only covered retirement benefits for people aged 65 and older. However, since its inception, the program has undergone significant expansions, and now covers a wide range of benefits, including disability benefits, unemployment benefits, dependent and survivor benefits, and Medicare and Medicaid coverage.
One key requirement for accessing these benefits is accumulating Social Security work credits. Work credits are essentially a measure of how much an individual has contributed to the Social Security system through their employment, and they serve as a way to determine whether a person is “insured” for benefits. The number of work credits required to qualify for benefits has changed over time.
When the program was first established, workers needed to accumulate five years of work to qualify for benefits, but this requirement only applied to men because there were far fewer women in the workforce at the time. In 1950, amendments to the Social Security Act allowed workers to earn work credits for military service. In 1956, the work credit requirement for women was reduced, and in 1972, equal requirements were established for men and women.
Since 1978, the work credit requirement has remained relatively stable. Workers can earn up to four credits per year, and need a total of 40 credits to qualify for most benefits, though there are some exceptions. This low bar ensures that more people are vested in the Social Security programs and can access the services they need when they need them.
Earning Social Security Work Credits
To qualify for most Social Security benefit programs, workers need to earn 40 credits throughout their working lifetime. Most workers earn four credits each year they work, so it typically takes ten years of work to meet the minimum requirement. These credits can be earned through wages paid by employers, self-employment wages, or military service. However, there are special rules for those who perform domestic work, farm work, or work for religious organizations or non-profits that don’t pay Social Security taxes.
The amount of credits earned is based on a worker’s total wages or self-employment income. As of 2022, one credit is earned for every $1,510 in qualified income (which means Social Security taxes were paid on it). To earn the maximum of four credits in a year, a worker must earn a total of $6,040.
Once a worker earns 40 credits, earning additional credits does not provide extra benefits. Monthly payments are calculated using the worker’s average earnings over their working years.
Benefits of Work Credits
Earning work credits is essential in order to access benefits such as health coverage, disability payments, and retirement payments for you and your family.
Social Security Retirement Benefits
One of the most well-known federal programs is the Social Security retirement benefit, which provides financial support to approximately 50 million Americans. To qualify for full retirement payment, individuals born after 1929 must earn 40 work credits.
You can apply for benefits online or in person at a Social Security Administration office. The earliest age at which you can start receiving retirement benefits is 62, but the monthly payment is higher for those who wait until they reach the “full retirement age” of 67 for individuals born after 1960.
The amount of your monthly payments is based on your lifetime earnings. The more you earned over your working years, the higher your payments will be. The Social Security Administration will use the 35-year period in which you earned the most, indexed to account for increases in average wages. However, these payments are not intended to be your only source of income after you turn 65 and should be used in conjunction with a pension, investment account, or private retirement savings account.
Medicare
Medicare is a healthcare program that covers nearly 64 million Americans and is another benefit that your work credits allow you to qualify for. Medicare is available to those who are 65 or older, those who are blind or disabled, such as those receiving SSDI benefits, and those with certain medical conditions such as permanent kidney failure or amyotrophic lateral sclerosis (Lou Gehrig’s Disease).
“Original Medicare” covers both hospital insurance (Part A) and medical insurance (Part B). Most enrollees qualify for premium-free Part A, but they will have to pay a premium for Part B. In 2023, the premium for Part B is $164.90. Original Medicare enrollees can also choose to add a Part D prescription drug plan, but this will cost extra.
Alternatively, there is the option to choose a Medicare Advantage (MA) Plan which typically bundles Parts A, B, and D, and many of these plans can be obtained at a zero-dollar premium. MA plans are run by private insurers who contract with the federal government to ensure the policies meet a certain standard of care.
Social Security Disability
Social Security Disability Insurance (SSDI) provides assistance to individuals who are unable to work due to a disability. Since disabilities can happen at any age, the number of credits required to qualify depends on the age at which you became disabled.
To qualify for Social Security disability benefits, you must meet the following work credit criteria:
- If you were disabled before the age of 24, you only need six work credits
- If you were disabled between the ages of 24 and 30, you need to have worked at least half of the time between the age of 21 and the year you became disabled.
- If you’re over the age of 31, you need at least 20 credits that were earned in the 10 years leading up to your disability. Those over the age of 42 generally need two more work credits per each two-year period they were able to work up until the age of 62 when it caps out at 40 Social Security credits.
Social Security Disability Insurance (SSDI) provides monthly financial assistance to individuals with long-term disabilities that prevent them from working and are expected to last at least 12 months or end in death. The amount of your benefit is determined in a similar manner to retirement benefits, using your average earnings over time.
The SSA calculates your average earnings during your working years, but only counts years after the age of 22 to account for “dropout years” and may discard some years. Because applying for SSDI can be a long process, many people find it beneficial to hire a disability attorney to help them navigate the application process. SSDI has a mandatory 5-month waiting period for any applicant to begin receiving benefits.
Despite this waiting period, the application process can still take several months to over a year, depending on the complexity of the case. To address this, the SSA has introduced a disability back pay program. This program allows applicants to be awarded retroactive payments beginning the sixth month after their application date.
Dependent Benefits
The Social Security Administration offers benefits to family members who are dependent on a worker. These benefits are available when the worker retires, becomes disabled, or passes away. Spouses, dependent children or grandchildren, and dependent parents are eligible for dependent benefits.
If your spouse retires and you are over the age of 62 or caring for a child under the age of 16, you can earn a spousal benefit of up to half of what your spouse receives. Dependent children under the age of 18 (or 19 if still in high school), or over the age of 18 with a disability that began before they turned 22, can receive up to half of their parent’s retirement or disability benefits. This benefit can also apply to grandchildren who are dependent on a grandparent.
Survivor Benefits
If someone who paid into Social Security passes away, certain family members may be eligible for survivor benefits. These benefits can be claimed by widows or widowers, unmarried children younger than 18 (or between the ages of 18 and 19 and still a full-time student in elementary or secondary school), children of any age with a qualifying disability, dependent parents over the age of 62, or in some cases a divorced spouse.
The surviving family members may receive a monthly payment of 75% to 100% of what would have been paid to the deceased. In addition, if the deceased had enough work credits, the family may receive a one-time payment of $255 after their death. However, it’s important to note that some widows or widowers may be subject to the government pension offset (GPO), which could reduce their benefits if the deceased spouse was earning a retirement or disability pension.
Work Credits for Social Security Benefits
To be eligible for most Social Security benefits, including retirement, disability, and survivor benefits, you need to earn work credits. These credits are earned based on the amount of money you earn while working and paying Social Security taxes. Most workers earn four credits per year, and 40 credits are required to qualify for benefits. Work credits are also available for military service and some other types of work.
Earning these credits allows you to access a variety of benefits, including monthly payments, healthcare coverage, and survivor benefits. The amount of benefits you receive is based on your lifetime earnings, and the application process can be lengthy and complicated. However, with the right guidance and support, you can navigate the system and secure the benefits you need to live a comfortable life.