How To Maximize Your Retirement: Social Security Eligibility
Understanding Social Security eligibility is critical to maximizing your retirement. In this post, we’ll discuss how eligibility is determined and what you can do to protect yourself from being underpaid.
Social Security Eligibility
To be eligible for benefits, you or your spouse must be a US citizen or legal alien and earn 40 credits. Benefits are determined by your birth year, retirement age and your lifetime earnings. For married couples, the lifetime earnings of a spouse also come into play.
Social Security provides three types of benefits: Retirement, Disability, and Survivor. Spousal benefits are a sub-set of Retirement benefits.
The Social Security Administration bases all benefits on your Primary Insurance Amount. They use a formula, but the simplest way to think of it is that your Primary Insurance Amount is the monthly check you are eligible to receive at your Full Retirement Age (age 65 to 67 depending on your year of birth). The formula uses the highest 35 years of Average Indexed Monthly Earnings, regardless of when you worked.
Your Earnings Record is determined by a credit system. You get one credit for each quarter of the year in which you had eligible covered income. You need a total of 40 credits to be eligible to get Social Security benefits.
Starting March 31, 2011, the Social Security Administration stopped mailing the annual statement of estimated monthly benefits and earning summary. You can find your annual statement here.
Protect Yourself from Being Underpaid
Nearly a billion dollars of Social Security income won’t be paid due to some easily avoidable but commonly made mistakes by those retiring. The good news is you can make sure you’re not underpaid and get all that you deserve from this benefit.
A first step to protecting yourself against being underpaid is to get a copy of your “Detailed Earnings Query” from the Social Security Administration. This is available for a small fee—anywhere from $15 to $80 depending on how many years you want to check (up to 40 years). This report breaks down what your employers reported for your income each year. Review and verify what your past employers reported to the Social Security Administration for your income.
I can help you with this process or you can download the Social Security Administration 7050-F4 [.pdf] form from their website.
In our next article, we’ll talk about what to consider when applying for Social Security to ensure you get the maximum benefit, while enhancing and guaranteeing your other assets.
Do you have any questions about Social Security? Chances are, you’re not alone. Share your questions here!