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It Just Got Harder to Earn the 40 Credits Necessary to Receive Social Security


 The 2023 Social Security increase will have retirees seeing 8.7% more income, but those preparing to retire might not make the cut to qualify for this benefit. Social Security is an earned perk of being an American taxpayer, but to earn eligibility you have to submit to a “credit system.” Much like passing a class to receive credit towards graduation, retirees must earn 40 credits in their working years to qualify for Social Security benefits. But with the 8.7% increase, earning those 40 credits just got more complicated.

For assistance sorting out your retirement plans and how Social Security fits into it, consider working with a financial advisor.

The History of Social Security Credits

The process of earning credits toward Social Security has been at play since 1978. It was the government’s way of only allowing contributing taxpayers to reap the benefits. There are three classifications of recipients, and all have a different required credit threshold: retirement recipients, disability recipients and those receiving survivor benefits.

Retirees: Require the full 40 credits to qualify
Disabled recipients: Require 6 – 20 credits depending on age
Survivors: Require 6 credits

How Do You Earn Social Security Credits?

You earn Social Security credits by working and paying Social Security taxes. When you receive a paycheck your employer is required to supply a pay stub. A pay stub acts as an itemized breakdown of your earnings and deductions such as your total hours worked and expenses like health insurance. Social Security taxes are a mandatory deduction that’s factored into your pay expenses.

To retire and receive Social Security benefits, you need at least 40 credits.You are only allowed to earn four credits max per year, so the 40 credits represents 10 years.  Credits are earned based on your annual income so some may earn their four credits relatively quick while others may have to work more to hit their target.

How Much Do I Have To Earn To Receive A Single Credit?

In 2023 you will need to earn $1,640 for a single credit, totaling $6,560 for the maximum four credits. This rate changes yearly depending on Social Security benefit increases. Since there was an 8.7% increase this year, 2023 will see a significant jump of $130 to earn a single credit.

To put it into perspective, other increases in previous years have been much smaller, averaging $40 to $60.

The Bottom Line

Those who have already earned their 40 credits need not worry; your finish line hasn’t moved. But anyone who is within ten years of retirement with little to no work experience will need to be aware of their earnings and credits moving forward.

If you are unsure about where you may stand with your credits, visit The Social Security Administration website and create a personal “my Social Security account.”

Tips for Retirement Planning

  • Saving is important. But you likely can’t stow away enough to last all of your golden years. You’ll need your savings to grow through investments. For help with this, contact a financial advisor. Our free matching tool will put you in touch with three financial advisors. You then can decide which financial advisor is best for your needs.
  • Taxes can take a big chunk out of your retirement income, depending on where you live. To find out if you should relocate after you hang up your hat, check our story on the best states to retire for taxes.

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