Definition
Social Security Credits are the units of measurement used to determine an individual’s eligibility for benefits under the Social Security program in the United States. These credits are accumulated over a worker’s career hours and wages, with social security taxes contributing to the earnings record.
Detailed Explanation
A person earns Social Security credits by working in a job covered by Social Security and paying Social Security payroll taxes (FICA or SECA taxes). The number of credits required to be eligible for various Social Security benefits, such as retirement, disability, and survivor benefits, varies.
In 2011, a worker earned one credit for every $1,120 in Social Security earnings, with a maximum of four credits possible in one year. As of the latest thresholds, this amount is indexed to wage levels and typically changes year to year. To qualify for retirement benefits, a minimum of 40 credits is required, meaning an individual must have worked and paid into the system for at least ten years in such a covered job.
Examples
- Example 1: Suppose John worked at a covered job and earned $5,000 in 2011. He would accumulate four Social Security credits for that year since $4,480 of his earnings ($1,120 per credit x 4) meets the requirement needed to earn the maximum credits.
- Example 2: Jane works part-time and earns $2,240 in a year. She would earn two Social Security credits for that year’s work.
Frequently Asked Questions
Q1: How do Social Security credits affect retirement benefits? A: You need a minimum of 40 credits to qualify for Social Security retirement benefits. Without these credits, you won’t be eligible for retirement benefits from Social Security.
Q2: Can I earn more than four Social Security credits in a year? A: No, you can only earn a maximum of four Social Security credits per year, regardless of your total earnings.
Q3: How can I check how many credits I have earned? A: You can check your Social Security credits by logging into your account at the Social Security Administration’s website or reviewing your annual Social Security Statement.
Q4: Do Social Security credits expire? A: No, once you earn Social Security credits, they remain on your record and do not expire.
Q5: Do Social Security credits affect disability benefits? A: Yes, Social Security credits also determine eligibility for disability benefits. Generally, the requirements for credits vary based on age and when the disability began.
Related Terms
- Tax Credits: Reductions in the amount of tax that must be paid, allowable under certain circumstances.
- FICA Taxes: Federal Insurance Contributions Act tax, which consists of OASDI (Old Age, Survivors, and Disability Insurance) and Medicare taxes.
- SECA Taxes: Self Employment Contributions Act tax, applying to the self-employed, contributing to Social Security and Medicare.
- Survivor Benefits: Social Security benefits that are paid to family members of a deceased worker who earned enough Social Security credits.
Online References
- Social Security Administration (SSA) Website
- Internal Revenue Service (IRS) - Understanding Employee vs. Contractor Designation
- AARP Social Security Resource Center
Suggested Books for Further Studies
- Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All by Nancy J. Altman and Eric R. Kingson
- Get What’s Yours - Revised & Updated: The Secrets to Maxing Out Your Social Security by Laurence J. Kotlikoff, Philip Moeller, and Paul Solman
- Social Security For Dummies by Jonathan Peterson
Fundamentals of Social Security Credits: Social Security Basics Quiz
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