Most Americans rely on Social Security retirement benefits during their retirement years. Some rely solely on these benefits, while nearly all retirees depend partially on the benefit payments. You probably already know that your benefit amount is calculated based on your lifetime earnings record. So how much does Social Security pay, and what happens to the monthly payments for low-income individuals? The primary insurance amount calculated based on their earnings record would likely be so low there would be no way for them to survive on that amount. The Social Security Administration has another method of calculating benefits for these individuals called the Special Minimum Benefit. Keep reading as we tell you how much this special amount is as well as how it is calculated.
What Is The Minimum Social Security Benefit?
The minimum monthly Social Security benefit in 2022 can be as low as $31.85. However, this benefit amount is not common. It would apply in the case of a person who earned an extremely low income while working, and that person barely meets the eligibility criteria to qualify for Social Security. They only worked and qualified for 11 years of coverage, and they elected to start their benefits as early as possible at age 62. Now, let’s take a look at the minimum amount for someone with a longer work history.
In 2022, the special minimum benefit for a worker with 30 years of work history who waits until full retirement age (FRA) to claim benefits is $950.80. When qualifying for the special minimum, you cannot increase your primary insurance amount by waiting past full retirement age. You will not accrue any delayed retirement credits. However, starting your benefits early will still reduce your monthly payment. The same worker with 30 years of work history will have his benefit reduced to $665.56 if he starts his benefits early at age 62.
How Social Security Benefits Are Calculated
The Social Security Administration (SSA) calculates retirement benefits based on your highest 35 years of earnings. Your PIA, or primary insurance amount, is calculated as follows. First, you need to obtain your average indexed monthly wage (AIME). This is done by determining your annual income for each year and using the SSA index tables to adjust the amount for inflation. The highest 35 amounts are then added together and divided by 420 to arrive at the average monthly amount.
Next, bend points are applied to the AIME. Your PIA will be the sum of 90% of the first $1,024 of your AIME plus 32% of your AIME between $1,025 and $6,172 plus 15% of any AIME over $6,172. That sum will be your primary insurance amount. This PIA is then adjusted depending on your retirement age. If you start benefits early, then the amount will be reduced. Starting benefits late can increase the amount you receive. Cost-of-living adjustments are then made to the amount on an annual basis according to the amount of inflation shown in the consumer price index.
When it comes to low-income individuals, their average earnings will result in a PIA calculation that is extremely low and likely below the poverty level. For this reason, the calculation of their monthly benefit is a little different. Instead of basing their payments on average earnings, their payment amount is based on the number of years that they qualified for Social Security. The SSA publishes the Special Minimum Benefits table that lists the monthly payment amount and the maximum family amount depending on the number of years of coverage the worker has. For these workers, their Social Security payments are calculated using both methods, and they will automatically receive the higher of the two.
Minimum Social Security Benefit At Age 62
While the average Social Security income in 2022 is $1,657 per month, many people receive much less than this. So, what is the lowest amount that you can receive at age 62? As we previously mentioned, waiting past full retirement age will not increase your payment amount if you are receiving the Special Minimum Benefit. However, starting your benefits early will still decrease the amount you receive. For someone who only paid Social Security taxes for 11 years at a low-wage job or perhaps only worked part-time, they could receive as little as $31.85 per month. Remember that the amount they would receive by performing the benefit calculation using their average wages would likely be even less.
For a person who has a full 30 years of earned income, the amount they receive looks much better. While it is still below the poverty line, it is exponentially higher than someone with only 11 years of work history. For a worker with 30 years of coverage, the minimum payment at age 62 would be $665.56. This amount increases to $950.80 if that person can wait until full retirement age to start benefits. Again, the benefit payment for this worker would be calculated using both benefit formulas, and he would automatically receive the higher of the two.
Qualifying For Social Security Benefits
To qualify for benefits, you must have enough work credits. A person can typically earn a maximum of four credits per year, and you must have at least 40 credits to qualify. You need to earn at least $1,510 per quarter in 2022 to receive work credit for that quarter. So, an individual earning just over $6,000 per year would receive all four work credits each year. This minimum amount increases each year for inflation. Once you have 40 work credits, then you can qualify for a benefit payment upon reaching age 62. The more work credits you have, the higher your payment is going to be.
In addition to the primary earner, there are also other beneficiaries who can receive benefits based on the primary earner’s work history. The most common beneficiary is a spouse. If your spouse is eligible to receive benefits, then you can claim Social Security spousal benefits based on his or her work history. The amount received by a spouse is typically 50% of the benefit amount of the primary spouse. In some cases, ex-spouses can also claim benefits. Upon the death of the primary earner, the spouse can switch over to survivor benefits. This allows the surviving spouse to receive 100% of the benefits that the deceased spouse was receiving. Dependents like children, step-children, or even grandchildren can also receive benefits in certain situations. These additional benefits can be extremely helpful to many people during retirement planning.
In addition to Social Security benefits, you also qualify for Medicare coverage upon reaching age 65. If you are already receiving your Social Security benefits at this time, then you will be automatically enrolled in Medicare coverage. If you are not yet receiving your benefits, then you will need to sign up for a Medicare plan.
The Bottom Line
If you earned a low income during your working years, then you may qualify for the special minimum Social Security payment. Congress enacted rules that give these low-income individuals the ability to calculate payment amounts based on their years of coverage instead of their average earnings. In 2022, this amount would be $950.80 for someone who worked 30 years and waits until full retirement age to start benefits. You can also sign up for a My Social Security account at SSA.gov to easily see an estimate of your retirement income.
Frequently Asked Questions
What is the minimum and maximum Social Security benefit?
The minimum Social Security benefit in 2022 is $31.85 per month. This would be the amount received by someone who only worked 11 years at a very low-income job and started their benefits at age 62. The maximum amount for 2022 is $4,194. This would apply to someone who earned at least the Social Security tax limit amount each year for 35 years and waited until age 70 to start their benefits.
Can a person who has never worked collect social security?
A person who has never worked cannot collect Social Security retirement benefits on their own. If that person qualifies for spousal benefits, then they can collect benefits based on the earnings record of their spouse. If the person is disabled, then they may be able to qualify for SSI benefits even though they have never worked.
What is the minimum social security retirement benefit for someone who has worked for 10 years?
The minimum benefit for a person in this situation would be $31.85 if calculated using the special minimum benefit amount. If the person earned a very high income during those ten years, the amount might be higher by calculating payments based on the traditional earned income method. The Social Security Administration will calculate benefit amounts using both methods, and the retiree will automatically receive whichever benefit amount is higher.
Can a person who is not a citizen of the United States collect Social Security?
Yes, you can collect Social Security as a noncitizen. However, you must meet the same rules to qualify. The person must be in the United States legally. They must have work authorization, and they must have a Social Security number. As long as they comply with these rules, then they can qualify for Social Security benefits such as retirement benefits and Social Security disability.
What is the lowest Social Security benefit for a disabled person?
Typically, SSI payments are the lowest disability payments. This is because you do not need a work history to qualify for these payments. Someone who receives SSDI payments will almost always receive a higher amount than SSI payments. In 2022, the monthly payment for an eligible individual receiving SSI payments is $841. This amount can be reduced if the individual has other countable income that must be subtracted from the monthly payment.