You probably already know that your Social Security retirement benefits will be calculated based on your lifetime earnings history. The more money you make while working, the more money you will receive from Social Security. There is a direct correlation between how much you pay in Social Security taxes and how much your monthly benefit payments are. But what happens if you earn a low income while working or only work for a few years? Or perhaps you only worked part-time for most of your life. Will you have a meager benefit amount? Thankfully, there is a minimum Social Security benefit amount. Keep reading to learn how much this amount is and whether you might qualify for Social Security’s special minimum benefit.
How Social Security Benefits Are Calculated
Before diving into the details of Social Security’s special minimum benefit, it helps to have an understanding of how the Social Security Administration calculates benefits. You likely already know that you need a certain number of work credits to qualify for benefits. The more Social Security tax you pay, the higher your benefits will be. Here is how the SSA calculates your benefit amount.
First, you will need to find your average indexed monthly earnings from your earnings record. To do this, you will need to index each year’s earnings to current values using the wage indexing tables provided by the Social Security Administration. This indexing process is partly used to help account for inflation. For example, if you earned $50,000 in 2010, that amount might be worth $58,000 at today’s value.
Once you have indexed each year’s earnings, you will want to average the highest 35 years of earnings. Take the sum of the 35 highest values and divide by 420. If you do not have 35 years of earnings, then you will need to use a zero for any years in which you had no earnings. Once you find this average, you will have your AIME.
After calculating your AIME, you will need to apply the Social Security bend points to obtain your primary insurance amount (PIA). Your PIA is the sum of 90% of the first $1,115 of your AIME plus 32% of your AIME between $1,115 and $6,721 plus 15% of your AIME above $6,721. This sum is your primary insurance amount, and this is the amount that you will receive if you start your benefits at full retirement age.
Finally, you might need to adjust your benefit amount based on your retirement age. If you start your benefits early, you will see a reduction of roughly 0.5% for each month that you start early. Similarly, waiting past full retirement age will allow you to accrue delayed retirement credits and increase your benefit amount by about 0.5% each month. Those credits will max out at age 70, so there is no need to wait longer than that to begin your benefits. You can use Social Security’s benefits calculator to get an estimate of how much your benefits will be.
Social Security’s Special Minimum Benefit
So, is there a minimum Social Security benefit? The answer is yes. To account for low-income earners, Social Security has something called the “special minimum benefit.” This benefit helps those who worked for many years but did not necessarily earn high wages. Using the normal Social Security calculation will result in a very low benefit amount for these individuals. Therefore, the special minimum benefit is calculated based on years of coverage instead of income. This means that people who receive the special minimum benefit will receive a payment amount that depends on how many years they have in their work history instead of how much they earned while working.
So, just how much is the minimum benefit? Unfortunately, the minimum benefit can still be quite low if you do not have many years of work history. Most people see a higher benefit amount by using the traditional calculation. Some beneficiaries could receive a monthly payment of less than $50. On the other hand, the maximum Social Security benefit is fairly large. The maximum benefit for 2022 is $4,194 per month.
The table below shows the amounts of the special minimum benefit based on the number of years of coverage you have.
Social Security Special Minimum Benefit Amounts Table
On small screens, this table is best viewed in widescreen.
Remember that the amounts mentioned above apply to Social Security retirement benefits. These amounts do not apply to SSI or SSDI benefits. SSI benefits do not require a work history, so those payments never depend on your earnings or the number of years you have worked. Social Security disability insurance benefits require a specific number of work credits, and those benefits will be calculated based on your average earnings while working.
Who Qualifies For The Special Minimum Benefit?
So, which retirees will qualify for the minimum Social Security payment? Average wage earners will usually rely on the traditional benefit calculation, but low-income individuals might benefit from the Social Security minimum payment. In recent years, the minimum benefit provision has changed so much that almost no one receives the minimum benefit anymore. This is because the special minimum calculation relies on cost-based inflation or the consumer price index, whereas the traditional benefit formula relies on wage-based indexing or wage growth. The traditional method almost always leads to a higher benefit, especially for full-time employees. As of 2019, only about 50,000 Americans still received the special minimum amount. However, here is how you can qualify if this provision benefits you.
First, you will need at least 11 years of coverage to qualify for the minimum payment. A year of coverage is a year in which you have worked and paid significant Social Security taxes into the Social Security trust funds. The other eligibility criteria are about the same as the criteria for normal Social Security benefits. You must be at least 62 years old to start receiving your benefits, and you need to be a U.S. citizen or permanent resident.
The Minimum Social Security Benefit At Age 62
Remember that retired workers will see a decrease in their benefit amount if they decide to start their benefits early. The same applies to the special minimum benefit. So, what is the minimum Social Security benefit at 62? We already learned that some workers with only 11 years of coverage would receive a monthly payment of less than $50. However, this assumes that the worker starts receiving benefits upon reaching full retirement age. Those who begin their benefits at age 62 will see a 30% reduction in their benefit payments.
This reduction applies to all those who take Social Security early – including both normal retirement benefits and the special minimum PIA. So, assume that your PIA would be the full special minimum of $1,033.50. If you start receiving your benefits at age 62, you will see a 30% reduction and end up with a benefit amount of only $723.45.
The same applies to the other end of the spectrum. Assume you only have 11 years of coverage and will receive the minimum benefit of $49.40. Starting your benefits at age 62 means you would only see a monthly payment of $34.58. As you can see, this amount would be well below the poverty level, so you would need some additional sources of retirement income to make ends meet. If you are on Medicare, then your Part B premium would take your entire Social Security check plus additional money.
Minimum Spousal Benefits & Survivor Benefits
Spousal benefits and survivor benefits related to the special minimum work exactly the same as they do with normal retirement benefits. Even if you do not have a work history of your own, you can qualify for benefits based on the work history of your spouse or ex-spouse. Spousal benefits are typically 50% of the primary beneficiary’s benefit amount. There are several strategies that can be used to maximize your Social Security spousal benefits. Survivor benefits are usually equal to 100% of the benefit amount of the deceased spouse.
Spousal and survivor benefits are subject to the family maximum benefit. The family maximum is usually set at 150% to 180% of the primary insurance amount, although you can see the table earlier in this article for the family maximum when it comes to the minimum benefit. Spousal and survivor benefit recipients will also be entitled to annual cost-of-living adjustments, just like primary beneficiaries.
The Bottom Line
Social Security’s special minimum benefit still exists, although fewer people receive it than ever before. The normal calculation for benefits will almost always result in a higher payment than the minimum benefit amount. When performing your retirement planning, you should be aware that the special minimum benefit is still available; however, your primary insurance amount based on your earnings record is likely to be higher. The minimum benefit is based on the number of years of coverage you have, not how much money you earned during those years.
Frequently Asked Questions
Does the minimum Social Security benefit change each year?
Yes, the minimum Social Security benefit typically changes each year. In most cases, this benefit is adjusted by the same percentage as the annual cost-of-living adjustment. Historically, wage growth has outpaced the increase in the price index. Therefore, the benefit amount you would see from your earnings record usually grows faster than the adjustments to the minimum benefit amount. This is why fewer and fewer people are receiving the minimum benefit each year.
How long do I need to work to get the minimum Social Security benefit?
You need to work for at least 11 years to qualify for the minimum Social Security benefit. The longer you work, the higher your payment will be. Once you reach 30 years of work, you will max out your potential minimum payment. This payment amount is based on the number of years you worked and paid Social Security taxes, not the amount you earned while you were working.
Can I get Social Security if I only worked for 10 years?
Yes, you can get Social Security if you have worked for 10 years. You need at least 10 years of work credits to qualify for Social Security benefits. So, what is the minimum Social Security benefit for 10 years of work? In that case, your benefit will be calculated using your earnings record. You need at least 11 years of coverage to qualify for Social Security’s special minimum benefit. However, your benefit amount that is calculated using your earnings record is likely to be higher than the special minimum benefit.
How much money do I have to make to qualify for minimum Social Security?
The amount you need to make changes each year. In 2023, you need to make just under $18,000 for the year to count as a year of coverage. You will need at least 11 years of coverage to qualify for the minimum payment from Social Security. However, remember that the minimum payment is becoming less common. Most people can earn more Social Security by using the standard calculation based on their earnings record instead of relying on the minimum payment.