When you work at a job that pays into Social Security, you earn wages and pay FICA taxes on them. In turn, you receive a certain number of work credits each year based on those wages. In order to retire and receive Social Security retirement benefits, you need to have earned a set amount of work credits throughout your working life. Work credits will also affect your eligibility for other Social Security benefits, such as Social Security Disability Insurance (SSDI).
You can receive a maximum of four work credits every year, and the amount of earnings that it takes to receive one work credit can change every year. In 2020, the amount of money you need to earn to receive one work credit is $1,410. Therefore, in order to receive the maximum amount of four work credits, you will need to earn at least $5,640. It does not matter in which quarter you earn the credit—you can earn one work credit every quarter or four credits in one quarter, for example.
Once you’ve earned credits, they remain a part of your work history and cannot be lost. If you decide to take a break from the workforce, the credits you earned prior to leaving will not disappear, and you can earn more credits if you decide to return to work later.
Since the earnings threshold is relatively low to earn one work credit, most people earn their maximum four work credits in one year quickly. Extra work credits do not increase your future retirement benefits. The amount you will receive in retirement every month is determined by an average of your earnings over your entire working life, not the number of credits you earn in the same timeframe.
The number of work credits that you need to obtain Social Security retirement benefits depends on your date of birth. For example, if you were born in 1929 or later, you will need to earn forty work credits, which roughly equates to ten years of work.
In contrast, the number of work credits needed to obtain SSDI benefits depends on your age when you became disabled. If, for example, you were 31-years-old or older when you became disabled, you generally need to have earned twenty work credits.
But there is an added layer of timing when it comes to qualifying for SSDI, which is called the recent work test. For instance, if you became disabled when you were 31-years-old or older, you need to have worked at least five out of the last ten years. If you became disabled between the ages of 24 and 31, you must have worked at least half the time since you turned 21-years-old, and if you became disabled prior to turning 24-years-old, you need to have worked at least 1 ½ years in the three-year period prior to your disability.
You are not entitled to benefits if you do not have enough work credits. But if you do not have enough work credits and still suffer from a long-term or permanent disability, you may qualify for Supplemental Security Income (SSI) benefits.