Don't Count on Social Security's Minimum Benefit to Be There for You

Most workers count on Social Security to provide vital benefits after they retire, and the system plays an important role in keeping older Americans out of poverty. The way Social Security benefits are calculated acts to replace more income for low-income workers than for those who earn more during their careers.

If you look closely at the rules governing Social Security, you'll find references to a minimum benefit under the program. Before you count on that provision as a guarantee of what you can expect to receive in retirement, you need to understand fully when the minimum benefit applies and how much you can expect to get if you qualify. Unfortunately, what most people find is that Social Security's minimum benefit is essentially worthless in terms of adding anything beyond what you've already earned under the program's normal provisions.

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The way minimum Social Security benefits work

Under current law, there's something called the special minimum benefit for Social Security. For those who qualify, this benefit amount can replace what the ordinary calculations for benefits would produce.

To be eligible to receive the special minimum benefit, it's necessary to accumulate 11 years of coverage by earning a certain minimum amount in wages or salaries each year. That threshold amount gets adjusted for inflation each year, with the 2018 amount set at $14,310.

If you meet that requirement, then the following table applies. The minimum amount varies depending on how long a work history you have.

Data source: Social Security Administration.

These numbers provide the primary insurance amount, or what you get if you retire at full retirement age. If you decide to take benefits early, then you'll get correspondingly less -- as much as 25% to 30% less at age 62, depending on when you turn 62 and therefore what your full retirement age is.

Why the special minimum benefit is all but extinct

The problem with Social Security's minimum benefit is that the way in which it's calculated has made it grow increasingly irrelevant for most retirees. The special minimum benefit uses price-indexed inflation measures to rise in value, compared to the wage-indexed inflation measures that the regular Social Security benefit uses. Because wages have risen at a faster pace than prices, the gap between the minimum benefit and the regular Social Security benefit has narrowed gradually over time. The SSA projects that 2018 will be the last year that a new beneficiary could theoretically receive a higher special minimum benefit than what the regular benefit would pay. In practice, this hasn't happened in the past 20 years, according to the SSA.

Moreover, it can be easier to qualify for regular Social Security than for the special minimum benefit. Regular Social Security requires 40 work credits, which is roughly equivalent to 10 years of coverage. The threshold amounts are much lower, however, and so some workers will get the full maximum of four credits even if they earn less during a year than the year-of-coverage threshold under the special minimum benefit provisions. For example, in 2018, you need only $5,280 to earn the maximum of four credits -- far less than the $14,310 special minimum benefit threshold.

It's up to you

Given how challenging it is to qualify for minimum benefits under Social Security, the best way to make sure you get the most you can from the program is to build up a long work history and maximize your earnings to whatever extent possible. The more you can improve your overall earnings history, the better prepared you'll be for retirement with the promise of a larger monthly payment from Social Security.