How You Earn Credits

As you work and pay Social Security taxes, you earn "credits", up to a maximum of 4 for each year.

"Credits" determine whether you have at least the minimum amount of work you need to qualify for benefits. You earn credits by working in jobs covered by Social Security or by operating your own business as a self-employed person. (You do not earn credits for pension payments or for interest or dividends on savings and investments. You do not pay Social Security tax on that kind of income.)

• Before 1978, when employers reported your wages every 3 months, we called credits "quarters of coverage", or QCs. Back then, you got a QC or credit if you earned at least $50 in wages in a 3-month calendar quarter.

• Since 1978, employers report earnings just once a year. Credits are now based on your total wages and self-employment income during the year, no matter when you do the actual work. You might work all year to earn your 4 credits, or you might earn enough for all four in a much shorter length of time.

• The amount of earnings it now takes to earn a credit changes each year. In 2008, you earn one credit for each $1,050 of your earnings. So if you earn at least $4,200 during the year, you get the maximum 4 credits.

Most people need 40 credits (10 years of work) to qualify for benefits. Younger people need fewer credits to be eligible for disability benefits or for their family to get survivor benefits if they die.

During your lifetime, you will probably earn more credits than the minimum number you need to be eligible for benefits. These extra credits don't increase your benefit amount; it is your average earnings over your working years that determine how much your monthly payment will be.