Retirement Planning

How Do You Earn Social Security Retirement Benefits?

Social Security retirement benefits are based on the number of credits you earn while you're working. Here's information on how your benefits are calculated and how you can track your estimated benefits online.

Social Security Eligibility for Retirement Benefits

Your Social Security retirement benefits are a critical part of your income when you retire. This is why it's a good idea to periodically check in with the Social Security Administration's (SSA) website when planning for retirement so you can better estimate what your monthly benefit may be. But have you ever wondered how your benefits are earned and what it is that qualifies you as eligible?

Using your Social Security number, the SSA tracks and maintains a database of your earnings and work credits. These credits are how the SSA determines if you have met the minimum amount to qualify for different types of benefits. The good news is that once earned, your credits remain on your record even if you stop working for a certain period of time, and you can always add more credits when you start working again. The not so good news is if you haven't accumulated enough credits, no benefits can be paid.

Retirement Planning with Social Security

When you work and pay Social Security taxes, you earn up to a maximum of four credits for each year. The number of work credits you need to have for retirement benefits depends on your date of birth. For example, anyone born in 1929 or later, must have 10 years of work (40 credits) to be eligible for retirement benefits, while those born before 1929 will require less.

Credits are based on your total wages and self-employment income during the year. Depending on how much you make, you might have to work all year to earn four credits, or you might make enough for all four in a matter of just a few months. For example, in 2017, you'll receive one credit for each $1,300 of earnings, up to the maximum of four credits. That means you must earn at least $5,200 to receive the maximum four credits for the year. Keep in mind that earning extra credits won't increase your benefit amount.

If you want to get an estimate of your Social Security retirement benefits based on your actual earnings, use the SSA's Retirement Benefit Estimator.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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