Here is a fun little problem that I never thought that we’d face just a couple years ago – our planned retirement date is so close, and my wife and I are so young, that it appears that my wife will be ineligible for Social Security, which she has judiciously funded for her entire working career, if she retires along with me in December of 2016.
Talk about a kick in the pants.
My wife will be just 31 at that point and, according to the Social Security Administration, she would not have earned enough “credits” to receive benefits at retirement age. You see, Social Security in the United States requires that workers earn a certain number of credits to be eligible for their own benefits. Each credit is awarded after a certain earned income level has been achieved for that year (which is based off of the average wage). The sticking point is the total number of credits that can be earned in a year is only 4.
This sticking point is responsible for our problem.
I admit to not knowing the ins and outs of Social Security credits before we stumbled upon it several weeks ago. Check out the Social Security benefits planner page for a more detailed look at how credits influence your benefits come “official” retirement.
The number that we are most concerned about is the number of credits needed for retirement benefits. According to the Social Security web site, each person needs 40 credits to be eligible for retirement benefits if born after 1929. Credits are earned based on wage averages for that year.
The amount of earnings it takes to earn a credit has changed since 1978. In the year 2015, you must earn $1,220 in covered earnings to get one Social Security or Medicare work credit and $4,880 to get the maximum four credits for the year.
It turns out that my wife will be three credits short of 40. Three freaking credits!
Now, while it is true that any additional income that my wife earns during our post-retirement thrill ride will count towards her total credits, we have meticulously planned our retirement without depending on a single dime of additional income, and we’d like to keep it that way.
But, we also want to get back all the money that was taken from my wife’s paycheck over her working career.
What’s a couple of future early retirees to do?
In our case, it’s easy – my wife continues to work passed our retirement date, but only a couple months. February of 2017 will be HER retirement month, which also coincides with her birthday – a pleasant extra perk of this new plan. I’ll most likely still retire December of 2016 and start work on our post-retirement home.
If you’re a future early retiree, are you sure that you’ll have enough credits to see your earned benefits decades down the line?
How to determine your earned Social Security credits
You may be wondering how many credits YOU have earned and whether or not you are currently eligible for Social Security benefits – or will be by the time that you plan to retire. If you are 60 years of age or younger, you can signup for a Social Security account online to view your official statement of earnings as well as your credit status.
If you already have an account, simply login and click on the ‘Estimated Benefits’ link towards the top of the page. If you haven’t created your account, visit the SocialSecurity.gov web page to create an account by clicking on “my Social Security” (pictured to the right as of October, 2015).
The account signup process will ask for some general information about you, including your name, address, date of birth and social security number. It will then ask you a few verification questions – historical in nature – that supposedly only you know. These might be questions about where you lived in the past, who your mortgage lender is or any car loans you may have (or have had in the past).
If all goes to plan with the verification step, you will then create a username and password for your account. Finally, you’ll be able to login.
Note: I had problems with the verification questions. I had mis-answered one of them, which required a 24-hour waiting period before I could try again. Eventually my “account” got locked out (linked to my social security number), so I had to visit a local Social Security office to have my account created. Visiting your local Social Security office is an alternative to creating your my Social Security account online.
Once your account is created and active, simply login to view your overview page. The overview page provides a quick look into your current benefit & payment status for any benefits that you might already be receiving, as well as an estimate of future benefits if you are not currently at retirement age.
To view your credit status, click the ‘Estimated Benefits’ link at the top of the page. The ‘Estimated Benefits’ page will give you the thumbs up or thumbs down about your credit status for Retirement, Disability and Survivors and Medicare benefits.
If you have earned enough credits, you’ll see a message like this:
You have earned enough credits to qualify for retirement benefits. At your current earnings rate, your estimated payment would be:
Underneath, your estimated benefits at the age of retirement will be displayed using your income from the previous year. Please note that these numbers assume that you continue working until retirement age. A reduction in earned income after early retirement will significantly effect your actual retirement numbers.
And hooray! I have earned enough credits to receive Retirement, Disability, Survivor and Medicare benefits! That means I can retire today and still receive Social Security benefits in 30 years. Sounds like a plan to me!
But then again, I’m 34 years old and my wife is only 30, so I have 4 years on the woman. Sadly, she does not yet have the credits needed for benefits, and an additional couple months of working will be well worth guaranteed benefits at “retirement age” – according to the Social Security Administration.
As a side note: It is also kinda fun to take a look through your earnings record (by clicking the ‘Earnings Record’ link at the top of the page) for a historical look at how much money you earned throughout your lifetime based on your tax returns. In 1999 I made a whopping $9k working at a camera shop in my home town. It’s fun to watch the numbers increase over time.
Do you have a Social Security account online? Have you looked at your credit status lately?
Steve is a 38-year-old early retiree who writes about the intersection of happiness and financial independence. Steve is a regular contributor to MarketWatch, CNBC, and The Ladders. He lives full-time in his 30′ Airstream Classic and travels the country with his wife Courtney and two rescued dogs.