There’s a good deal of misinformation floating around concerning how long you must work to be eligible for Social Security retirement and how your benefit amount is determined. You may hear that 3, 5 or 15 years are counted by the Social Security Administration. In reality, you need 10 years of work history to qualify, and this lifetime work history is taken into account when your monthly payment is calculated.
Accumulating Work Credits
Qualifying for Social Security retirement benefits depends on work credits. According to the SSA, you earn one work credit for each calendar quarter in which you work, pay Social Security tax and make a minimum amount, which changes every year to keep up with inflation. For instance, the threshold for 2015 was $1,220. You can earn up to four work credits per year and you need 40 such credits to qualify for retirement benefits. That’s 10 years worth. However, the quarters you work don’t have to be consecutive. Also, working intermittently won't change how your benefit is calculated -- that depends only on your earnings. You just need to accumulate 40 credits by the time you reach retirement age to qualify.
Benefits and Lifetime Earnings
Work credits only establish eligibility for Social Security retirement. The size of your monthly check is determined by your lifetime wages and self-employment income. These earnings are reported to the SSA each year when you file your taxes. Only money you make by working and on which you pay Social Security tax is counted. Other income, like interest, dividends and investment profits, doesn't impact this benefit. When you start receiving Social Security at normal retirement age -- 66 as of 2015 -- you get 100 percent of your benefit. You can start as early as age 62, but filing for Social Security that early means your benefit amount can drop as much as 25 percent. You also can delay before receiving Social Security. If you do, the SSA tacks on a premium to your regular benefit amount for each year you wait up to age 70.
Determining Your Monthly Benefit
When the time comes to start collecting Social Security retirement, the SSA computes your benefit amount based on your work history. First, earnings for each year are multiplied by an index factor to adjust for inflation. Next, the indexed earnings for the 35 years you made the most money are added together. If you work fewer than 35 years, the years you did not work are counted as zero. The total is divided by 420 to figure your average monthly earnings. In 2015, the SSA multiplied the first $826 of monthly average earnings by 90 percent. Earnings over $826 and under $4,980 were multiplied by 32 percent. If you averaged more than $4,980, the excess was multiplied by 15 percent. The results were added together to calculate the monthly benefit. The index factors and dollar amounts are adjusted each year to keep up with inflation, so check with the SSA for current numbers.
If you don’t work long enough to qualify for Social Security retirement you can still get a monthly check if you are married and your spouse qualifies. The monthly benefit is one-half of what your spouse receives if you wait until full retirement age to start collecting. If you start earlier, the size of the spousal benefit is smaller. You have to be at least 62 or be responsible for taking care of a dependent child to start collecting benefits. In addition, your spouse must be receiving Social Security. If you’re divorced, you can collect benefits based on your ex-spouses monthly payment as long as you were married at least 10 years and haven’t remarried.