Applying for Social Security Disability Insurance benefits (SSDI) can be a complex, confusing process. The Social Security Administration (SSA) has many rules and regulations regarding work history and wages, and that’s before they determine whether your medical condition is disabling.
Social Security “Credits” or “Quarters of Coverage” are one of the first things the SSA reviews when they receive an application for SSDI. These credits are used to determine whether a worker is insured for Social Security retirement benefits or disability benefits.
8 Things to Know About Social Security Credits
- How are Social Security Credits Earned?
- Why Do I Need Social Security Credits?
- How Many Social Security Credits Do I Have? How do I check my Social Security Credits?
- Earning Social Security Credits for Self-Employment Income
- What is “Fully Insured” Status and Does It Expire?
- How many Social Security Credits Do I Need?
- Supplemental Security Income and Social Security Credits
- Frequently Asked Questions About Social Security Credits, Retirement, and Benefits
Social Security requires that each beneficiary is “fully insured” and Social Security credits are issued to track insured status. When we work and pay taxes into Social Security, we earn credits or “quarters of coverage,” which is similar to an insurance policy premium, paid each payday by OASDI payroll withholding.
1. How are Social Security Credits Earned?
FICA taxes pay for Social Security and Medicare insurance, and one credit is given for a specific amount of wages earned and taxes paid. The amount of wages it takes to earn a credit changes each year, and for 2018, the amount is $1,320. For each $1,320 you earn (in 2018), you will receive one quarter of coverage for retirement or for disability insurance. The amount it takes to earn a quarter of coverage slightly increases each year.
Even if you change jobs or stop working for a while, you don’t lose any Social Security credits. They stay on your Social Security earnings record for your entire lifetime. Even though you can only earn four credits each year, the amount of your monthly Social Security benefit payments is based on the average of your highest 35 years of earnings.
2. Why do I need Social Security Credits?
Although paying Social Security taxes is painful when you first start working, the long-term benefits are far-reaching, paying retirement and disability benefits.
Social Security is a government-sponsored retirement pension and disability insurance program. A private company’s retirement plan requires that employees work for the company for a specified period of time in order to be “vested” in the plan– and Social Security has similar requirements. Each beneficiary must be “fully insured” in order to qualify for benefits. Social Security requires 40 quarters of coverage over an entire work life to be eligible for monthly retirement benefits.
Social Security also pays monthly benefits to workers who cannot work for at least 12 months due to a medical impairment. Social Security credits are required to be fully insured and eligible for monthly benefit payments. Many workers have not had time to work 10 years before being faced with a medical condition that prevents working and, as a result, Social Security has lowered the number of credits required for disabled workers under retirement age.
3. How Many Social Security Credits Do I Have? How do I check my Social Security Credits?
To check the number of Social Security Credits that are on your earnings record, register for your personal account at www.ssa.gov/myaccount. Opening your SSA My Account will give you access to your earnings history, show how many Social Security credits you have, display your insured status, and you can see an estimated monthly benefit amount based on your work history. You can also update your address, request a new Social Security card, and make an appointment with your local Social Security office to make any corrections to your earnings record.
An alternative to online registration is to call the Social Security Administration at 800-772-1213 and request a Social Security benefits statement be mailed to you. The paper Social Security statement will also contain your earnings history, Social Security credits, and an estimated monthly benefit amount.
This is a great time to verify that your earnings records are an accurate reflection of your work activity and wages. If your earnings record isn’t accurate, take your income tax returns, W2 statements, and pay stubs to the Social Security office and corrections can be made. Make sure that any bonuses or incentive payments are included as well as commissions and tips. All of these will increase the amount of your benefit payments.
4. Self-Employment Income
To earn Social Security Credits for self-employed individuals, both the employee and employer portions of Social Security taxes must be paid. In 2018, the Social Security tax rate is 12.4% for self-employed workers with net earnings of $128,400 or less.
5. What is “Fully Insured” Status and Does It Expire?
In order to collect Social Security, a certain number of credits must be earned within a specific timeframe to be considered “fully insured” for benefit payments.
- Retirement = 40 credits over a lifetime of working
- Disability = Generally, 20 credits must be earned in the 10 years prior to the date you became unable to work. There are special earnings requirements for disabled workers under age 31.
Just like with a private insurance plan, your insured status can expire once you stop working and paying “premiums” in the form of Social Security taxes. If you have been forced to stop working because of a medical condition, do not delay filing an application for disability insurance benefits because your insured status may expire.
6. How many Social Security Credits Do I Need?
Social Security Disability Insurance (SSDI) requires that a worker be “fully insured” before considering whether a medical condition is disabling.
To be fully insured, you must have one quarter of coverage for each year between age 22 and your age at disability. For example, if your disability began at age 48, then you must have at least 24 quarters of coverage. This is a concern if you haven’t worked steadily since you turned age 22. For instance, if you stayed home with children or worked part-time for low wages, you may not have enough quarters of coverage to be fully insured if you’re unable to return to work because of a disabling medical condition.
There are special insured rules for workers under 31 and under 24, who are required to have as few as six credits or as many as 12 in order to qualify for Social Security benefits.
Register at myssa.gov to check that your earnings record is up-to-date and accurate. The amount of your monthly benefit payments will be calculated for both future retirement and immediate disability.
7. Supplemental Security Income and Social Security Credits
There are no earnings requirements for SSI. Supplemental Security Income is a needs-based program for disabled, aged, and blind individuals with significantly limited assets. All income and liabilities for the entire household must be disclosed to SSA, often on a monthly basis. Some low-income workers will also qualify for additional SSI benefits if the amount of their monthly Social Security benefit payment is below a specified amount. For more information, be sure to read our helpful article about which disability program is best for you.
8. Frequently Asked Questions about Social Security Credits, Retirement, and Benefits
What is the Windfall Elimination Provision?
If during your career, you worked for a government entity with its own pension program that didn’t require payment into Social Security, you will not have Social Security coverage for those years. If you also had work that was covered by Social Security, there’s the potential that your total retirement earnings could be higher than those who worked exclusively for Social Security-covered wages. Social Security has eliminated this “windfall” by reducing your Social Security payments to account for the other pension you’re receiving.
How Does Early Retirement Affect My Social Security Credits?
Any worker who is fully insured for Social Security may elect to receive Social Security retirement at any time between ages 62 and their full retirement age. If you elect for early retirement, your benefits are reduced for each month you retire early. Full retirement age depends on your birth year. If you continue to work after your full retirement age, your benefit amount will increase for each month you delay receiving benefits until age 70.
Am I Eligible for Survivors Benefits?
A widow or widower of an insured worker may begin receiving survivor benefits when they reach 60 years of age if they’re not currently married. Survivors benefits are also payable to the unmarried divorced spouse of an insured worker.
If the surviving spouse worked under Social Security and has 40 credits, they may elect to receive survivors benefits and delay receiving Social Security retirement benefits under their own Social Security number. Postponing receipt of retirement benefits would increase the monthly payment amount.
One individual cannot receive survivors benefits and their own retirement benefits at the same time. There is also an earning limitation for survivor benefits, which is $17,040 for 2018.
Can I buy Social Security Credits?
No, Social Security credits cannot be bought. Social Security credits must be earned through working in a job that is covered by the Social Security Administration. You can earn credits through an employer that withholds OASDI payroll taxes or through self-employment taxes. Make sure your tips and commissions are included, which will increase your monthly benefit amount when it comes to collect your retirement or disability payments.
What is my Full Retirement Age?
Social Security’s website contains charts showing full retirement age, which depends on the year you were born:
Year of Birth Full Retirement Age
1937 or earlier 65
1938 65 & 2 months
1939 65 & 4 months
1940 65 & 6 months
1941 65 & 8 months
1942 65 & 10 months
1955 66 & 2 months
1956 66 & 4 months
1957 66 & 6 months
1958 66 & 8 months
1959 66 & 10 months
1960 and later 67
What are Early and Late Retirement Benefits?
Fully insured workers can choose to receive Social Security retirement benefits beginning at age 62, although the benefit payments will be reduced by approximately 30% at age 62. The reduction is less for each successive year up to your full retirement age. There is also a limit on the amount of wages you can earn and still receive the entire benefit amount. In 2018, the annual earnings limit is $17,040.
If you delay your Social Security retirement until after your full retirement age, your monthly benefit amount will increase up to 8% per year for those born after 1943. Visit their webpage for more information on early and late retirement, along with a retirement benefits calculator.
Can I Change My Mind About Retiring?
If you apply for Social Security Retirement and change your mind, you may be able to withdraw your application. There are some caveats, of course.
First, you must withdraw within 12 months of your entitlement to retirement payments. Second, you must repay any benefits you have received. This repayment includes benefits paid to your spouse and children and any Medicare premium payments.
You can also request to suspend your retirement benefits as long as you’re not 70 years of age. Your benefit payments will be suspended the month after you make the request and will automatically start when you reach your 70th birthday. You can also restart Social Security retirement payments any time before age 70.
Social Security Credits: The Bottom Line
The bottom line is that Social Security is an insurance plan– premium payments must be made. Workers make their “premium” payments through payroll deductions, which gives them access to retirement and disability insurance programs sponsored by the Federal Government. Like many private companies with retirement pension and disability insurance plans, Social Security requires a minimum amount of work to be “vested” in their plan. Social Security requires 40 credits to be eligible for retirement payments, earned 4 credits each year over an entire work life. For disability payments, the required number of credits is less and depends on the age disability began.
The first step in the SSDI process is determining whether a worker is “fully insured,” with the minimum number of work credits earned within a specified time period. Contact the Social Security Administration to check your Social Security credits and make any necessary corrections to your work history. You can also check the amount of monthly benefit payments to help you make your decision to apply for disability benefits.
Applying for Social Security Disability Insurance benefits can be stressful when you’re already coping with a disabling medical impairment. We hope this information on Social Security Credits will help you make the decision whether to apply for SSDI. Please don’t hesitate to contact Acadia Law Group with your questions on the application process and to obtain a representative who can help you receive benefits.