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The 40 Quarters Myth: What You Need to Know
We need to make one thing clear: Social Security is not based on your best 40 quarters of earnings. This is a common misconception that keeps floating around.
The truth is
- You need 40 quarters (or “credits”) to become eligible for Social Security retirement benefits
- Your actual benefit amount is calculated using your highest 35 years of earnings
Those 40 quarters are very important for qualifying, but they don’t tell you how much you’ll get every month when you retire.
What Are Social Security “Credits” Anyway?
Before diving deeper, let’s understand what these “credits” or “quarters” actually mean:
- In 2022, you earned one credit for each $1,510 in income
- You can earn a maximum of 4 credits per year
- This means you need to work at least 10 years (4 credits × 10 years = 40 credits) to qualify for retirement benefits
So even if you earn enough for all 4 credits in just a few months of work, you can’t earn more than 4 in a single calendar year. This system ensures you’ve participated in the workforce for a reasonable amount of time before collecting benefits.
How Social Security Actually Calculates Your Benefit
Now that we’ve busted the “highest 40 quarters” myth, let’s look at how your benefit is really calculated:
Step 1: The SSA Looks at Your Lifetime Earnings
The Social Security Administration (SSA) tracks your earnings throughout your entire working career. Every dollar you earn that’s subject to Social Security taxes gets recorded.
Step 2: Your Earnings Are Indexed for Inflation
Your past earnings are adjusted for inflation (called “indexing”) to bring them up to near-current wage levels. This ensures that your earlier years of work, when wages were generally lower across the economy, aren’t undervalued.
For example, if you earned $15,729 in 1985, the SSA might apply an indexing factor of 3.9603 to adjust that amount to $62,291 in today’s dollars (based on the example from the SSA website).
Step 3: Your Highest 35 Years Are Selected
The SSA identifies your 35 highest-earning years (after indexing). If you worked less than 35 years, zeros are added to your benefit amount to make up for the years you didn’t work.
This is why working for at least 35 years is the best way to get the most out of Social Security.
Step 4: Your Average Indexed Monthly Earnings (AIME) Is Calculated
The SSA adds up your earnings from those highest 35 years and divides by the number of months in 35 years (420) to determine your Average Indexed Monthly Earnings (AIME).
Step 5: Your Primary Insurance Amount (PIA) Is Determined
Finally, a formula is applied to your AIME to calculate your Primary Insurance Amount (PIA), which is your basic benefit amount at full retirement age.
Real-Life Examples from the SSA
The Social Security Administration provides examples that show how this works in practice. Let’s look at two workers retiring in 2025:
Case A: Born in 1963, retiring at age 62
- Has earnings from 1985 through 2024
- After indexing all earnings and taking the highest 35 years
- AIME = $5,556
Case B: Born in 1959, retiring at full retirement age
- Has earnings from 1985 through 2024
- After indexing all earnings and taking the highest 35 years
- AIME = $11,351
These examples clearly demonstrate that the benefit calculation is based on 35 years, not 40 quarters.
Common Questions About Social Security Calculations
Do my last few years of work matter more?
While it’s sometimes said that your last 3 or 5 years of work are most important for Social Security, that’s not entirely accurate. Your benefit is determined using your highest 35 earning years, regardless of when they occurred. If your later working years are among your highest-earning, they’ll replace lower-earning years in the calculation.
What if I work part-time or have gaps in my employment?
If you don’t have 35 years of earnings, zeros will be included in your calculation, lowering your benefit amount. Working longer, even part-time, can help replace those zeros with actual earnings.
How much will I get if I make $60,000 a year?
According to the information from FinanceBand, Social Security replaces about 42% of a $60,000 salary. This means you might receive approximately $2,096.48 per month if you retire at full retirement age.
What about higher earners?
For those earning $120,000 per year, Social Security might replace about 26% of your income, with an initial monthly benefit around $2,920 at full retirement age.
The Impact of When You Start Collecting Benefits
Your age when you begin collecting Social Security significantly affects your monthly benefit:
- Early retirement (age 62): Your benefit will be reduced by up to 30% compared to waiting until full retirement age
- Full retirement age (67 for those born in 1960 or later): You receive your full benefit amount
- Delayed retirement (up to age 70): Your benefit increases for each month you delay claiming after full retirement age
Strategies to Maximize Your Social Security Benefits
Now that we understand how benefits are calculated, here are some strategies to maximize your Social Security payout:
- Work at least 35 years – This prevents zeros from being factored into your benefit calculation
- Earn more during your career – Higher lifetime earnings mean higher benefits
- Consider working longer – If your current earnings are higher than some of your earlier years, working longer can replace lower-earning years in your calculation
- Time your claim strategically – Waiting until full retirement age or even age 70 can significantly increase your monthly benefit
What If You Don’t Have Enough Credits?
If you haven’t earned the required 40 credits for retirement benefits, you have a few options:
- Continue working to earn the needed credits
- Apply for Supplemental Security Income (SSI) if you’re disabled and have limited resources
- Check if you qualify for benefits based on a spouse’s work record
How to Check Your Social Security Credits and Earnings
The easiest way to check your Social Security credits and see your earnings history is to:
- Visit www.ssa.gov
- Create a “my Social Security” account
- Review your Social Security Statement
This statement shows your earnings history and estimates your future benefits based on those earnings.
Final Thoughts: Planning for Retirement
Understanding how Social Security actually calculates your benefits is crucial for retirement planning. While you need 40 quarters (10 years) of work to qualify, your benefit amount is based on your highest 35 years of earnings.
Social Security was never designed to be your only source of retirement income. It typically replaces about 40% of pre-retirement income for average earners. This means you should also be saving through other vehicles like 401(k)s, IRAs, or other retirement accounts.
By knowing exactly how your benefits are calculated, you can make better decisions about when to retire and how to maximize your Social Security payments. And remember – the more accurate information you have, the better positioned you’ll be to enjoy a comfortable retirement!
Have more questions about Social Security? Leave a comment below and I’ll do my best to help you navigate this complex but important system.
How to earn Social Security credits
In order to qualify for Social Security benefits, you need to accrue 40 credits, if you were born after Jan. 2, 1929. To earn one credit in 2025, you must have wages and self-employment income of $1,810. You may earn up to four credits per calendar year. In a single year, you must earn $7,240 to get the full four credits, and you have the full year to earn that much, though you can earn it in any period of that tax year. So to earn 40 credits, you’ll need to meet the minimum wage or self-employment income in at least 10 years, though they need not be consecutive.
And don’t sweat it if you’re self-employed and run your own business.
“If you are self-employed, you earn Social Security credits the same way employees do,” says certified financial planner Alexey Bulankov, private client advisor, East West Bank.
Once you earn the 40 credits, earning more credits won’t increase your benefit payment. Instead, your retirement benefit is based on how much you earned during your working years. (Here’s the average Social Security check. ).
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Lisa Dammeyer is an investing editor at Bankrate. She has more than six years of experience distilling down complex topics for everyday people.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo.
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve kept this reputation for more than 40 years by making it easier for people to make financial decisions and giving them confidence in what to do next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our content is written by professionals with a lot of experience and is edited by experts in the field to make sure it is fair, correct, and reliable.
Our reporters and editors focus on the points consumers care about most — how to save for retirement, understanding the types of accounts, how to choose investments and more — so you can feel confident when planning for your future. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo