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Social Security Credits: How They Work (and Why You Need Them)

By Dan Caplinger - Updated Aug 24, 2017 at 1:48PM

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To get benefits, you need to have enough Social Security credits. Find out how to get them.

This article was originally published on May 10, 2015 and was updated on Aug. 24, 2017.

Social Security is the lifeline for tens of millions of Americans, with retirees and disabled workers alike earning benefits from the Social Security program. In order to qualify to receive Social Security, workers need to earn a certain number of Social Security credits. But many workers don't even know about the credit requirement, let alone what they need to do to earn credits.

With that in mind, let's take a closer look at Social Security credits and what you should know about them and their impact on your benefit eligibility.

Elderly couple laughing while enjoying snack at cafe

Image source: Getty Images.

Why Social Security credits are important

As the Social Security Administration puts it, Social Security credits are the "building blocks" for determining benefit eligibility. If you don't have enough credits, then the SSA doesn't have to pay you monthly checks.

Earning Social Security credits is simple. Each year, the SSA looks at the amount of money you earn from work on which you pay Social Security payroll taxes. In 2015, you get one credit for every $1,220 you make and pay Social Security taxes on. That $1,220 figure gets adjusted for inflation every year.

You can only earn a maximum of four Social Security credits each year. So it doesn't matter if you earn $5,000 or $500,000 in a given year -- you'll still only get four credits.

How many Social Security credits do you need?

The number of credits you need to be eligible for Social Security depends on the program and your age. For retirement benefits, the required number of credits is simple: You have to have earned 40 credits, equivalent to 10 years of work if you earn the maximum number of credits per year.

Disability benefits involve complex rules. Having 40 credits is always adequate, but the younger you are, the fewer credits you need. Those who are younger than 24 need six credits over the three years prior to the disability, while those between 24 and 31 need to have credits for half the period between age 21 and their current age at the time of the disability. Those who are 31 to 42 need 20 credits, with the number of credits rising by two for every two years older than 42 you are.

For survivors benefits payable to your family if you die, the number of credits you need isn't as clear. The SSA is somewhat cryptic about the exact number of credits you need, merely saying that "the younger you are, the fewer years you need to work." Those with 40 credits are definitely eligible, though, and a special rule allows those who've worked for a year and a half out of the previous three years to have survivors benefits paid to their children and to a spouse caring for those children.

Can you lose credits?

Once you've earned Social Security credits, they stay on your record even if you have a gap in your work history. When you return to work, you'll continue to add to your credit total.

It's important to remember, though, that certain jobs don't pay income that's subject to Social Security taxes, so you won't earn credits on your earnings there. For instance, many state and local government workers pay into a separate pension system in lieu of making Social Security tax payments, so while their earnings will help them be eligible for pension benefits in the future, they won't count toward receiving Social Security benefits.

How can you find out how many credits you have?

Your Social Security statement should tell you whether you have enough credits to be eligible for benefits. You should also be able to calculate your number of credits from your earnings history.

Social Security benefits are a vital part of your financial planning, so making sure you have enough Social Security credits to qualify is important. Checking to be sure you know where you stand is a smart thing to do before you end up needing benefits.

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