How to Calculate Social Security Credits, Formerly Quarters of Coverage

The Social Security Administration (SSA) uses a credits system to determine who is eligible to collect benefits. The SSA will examine whether you have met the minimum work requirements for eligibility. These credits, once called “quarters of coverage,” are based on the amount of time you have worked, and, to some extent, the compensation you received for your work.

Many people are curious about how they can determine how many credits they have and whether they have enough to receive benefits. The credit system isn’t always straightforward, and it may work differently for disability benefits, survivor’s benefits, and other types of Social Security benefits.

Learn all about Social Security credits, what they are, how they work, and how to determine whether you have enough to collect the benefits for which you want to apply.

An Overview of Social Security Credits

The SSA assigns credits to you based on taxes you pay every year. It’s possible to earn up to four credits annually, and it’s possible to earn them very quickly. This rule applies to everyone regardless of their income. The bar is deliberately set low to allow those with low income to earn the same credits as those with high income.

In 2021, for example, the benchmark to earn the maximum four credits was $5,880, with one credit assigned for each $1,470 in earnings. Essentially, if you made $5,880 in taxable income during 2021, you got all four credits, which were awarded when you filed your 2021 income tax return.

Social Security Credits vs. Quarters of Coverage

A quarter of coverage, or QC, is a legal term formerly used to refer to Social Security credits. Quarters of coverage were considered the basic unit to determine whether someone had enough work under their belt to qualify for Social Security benefits. The reason quarters of coverage were used is because employers used to report earnings for employees on a quarterly basis.

Starting in 1978, the federal government shifted the way employers reported wages to annually instead of quarterly. Because of this, the SSA was only getting information once per year. It became necessary to change the way benefits eligibility are determined. Inflation also played a role, resulting in rising wages and making the prior numbers outdated. As such, the government changed the laws to issue credits based on annual income. The idea that one earned a maximum of four credits per year, however, was retained.

Because of this, the term quarters of coverage is still used by some, though “Social Security credits” is the preferred term now. Still, we can see the two terms as somewhat interchangeable, and where you see one, the other also applies.

As such, like credits, quarters of coverage are determined by income, with the earnings requirement for one quarter changing from year to year. The SSA offers a table that lets you check the earnings required to earn a single quarter of coverage.

Earned Income, Tips, Self-Employment, and Other Income

Social Security counts only “earned income,” or income you get from working a job, toward benefits credits. If there is a period of time when you are on unemployment benefits, you do not earn Social Security credits. The SSA does not recognize your unemployment benefits as earnings, and as such, they don’t count toward your benefits eligibility.

However, it is important to know that if you receive income from Social Security for another issue, whether retirement or injury, it can reduce the unemployment compensation you can get. Your state unemployment office or Social Security disability attorney will have more information on this issue.

Some income beyond standard wages also counts. If you are a tipped employee, your tips count toward Social Security credits, so long as you report your tips to the IRS. Vacation and severance pay also count toward credits. Likewise, self-employment income counts as earned income, which is good because self-employment tax is much higher than the tax you pay as a hired employee of a company.

Pension and Credits

If your company offers a government-run pension plan, the government considers this in lieu of Social Security, so your retirement benefits come from a pension plan instead of Social Security. If you work partially at a government pension job and partly at a regular Social Security-eligible job, this typically affects the amount of money you get as opposed to your eligibility, because you’ll get a partial pension and partial Social Security.

Unearned Income

Unearned income, like rental payments, dividends, and interest, doesn’t count toward credits, nor do gifts or loans. As a rule, if you didn’t pay Social Security tax on the earnings, you probably aren’t getting credits.

Credits Required for Retirement Benefits

To be eligible for retirement benefits, you generally must earn 40 credits. If you earn all four credits per year, after 10 years you will be eligible to receive retirement benefits.

Credits Required for Disability Benefits

In some situations, you don’t have to meet the full 40 credits to be eligible for benefits from the SSA. Disability benefits are one such situation. Social Security Disability Insurance (SSDI) uses different benchmarks depending on when you became disabled. If you are at least 62 years of age, the 40-credit rule still holds true. If you were disabled before you reach age 24, however, you only need six credits, if you earned the credits within the past three years.

If you are between 24 and 31 years of age, you must have earned full credits for half the years between age 21 and the age when you became disabled. Thus, if you were disabled at 31, you must have 20 credits, or four credits per year over five years of working, within that past 10 years.

If you become disabled over the age of 31, credits can range from 20 through the maximum of 40. The SSA website has full information on how many credits you need to earn at a given age. It also contains information on the strict conditions you must meet to qualify as disabled to receive benefits.

Credits for Survivor’s Benefits

Survivor’s benefits are a bit different, because they rely on the credits earned by the deceased, not those receiving benefits. These benefits also require far fewer credits than standard retirement benefits. To receive survivor benefits, the deceased must only have earned six Social Security credits over the three years preceding their death. If you meet this qualification, the survivor’s children and their spouse may be eligible to receive Social Security benefits.

Speak to your Social Security attorney for more information regarding survivor benefits if you think you may be eligible to collect on behalf of a deceased parent or spouse. Remember that you personally do not need to have credits to earn spousal benefits.

Earning More Credits, or Non-Simultaneous Credits

So long as you earn 40 credits during your working life, you are eligible to collect retirement benefits. Earning more than 40 credits has no effect on your Social Security earnings, and the number of credits does not affect the amount of money you receive. They are simply used as a qualifier to gain Social Security. Whether you’ve earned 40, 80, or 160 credits, you are eligible to collect retirement benefits.

By the same token, you do not have to earn 40 credits consecutively to be eligible. You just need to earn 40 credits throughout your working life. If you earn 20 credits, have a long stretch of time where you are out of work and not earning credits, then start working again and earn 20 more credits, you will have earned the 40 requisite Social Security credits to be eligible for retirement benefits.

Where more credits can be important, however, is related to what is called the “20/40” rule, which comes into play for disability benefits. The SSA requires that for the 40 quarters (or credits) immediately preceding your application for disability, you must have earned 20 of them in the past 40-quarter period. Put succinctly, if you require 40 credits to get disability benefits, you have to have earned 20 of those credits in the past 10 years.

Verifying Your Credits

Every year you should get a summary of the benefits you’ve earned roughly three months before your birthday. You can also call the SSA and ask for or download Form SSA-7004 to request that a summary of benefits be mailed to you. The statement will detail your earnings history, the credits you have accumulated so far, and an estimate of the retirement benefits you can collect at full retirement age.

You should always check the math on this form to be sure it is accurate, and if you see any mistakes, contact the SSA to correct the error. You may need help from a qualified Social Security attorney to get the corrections made.

Calculating Social Security Credits

Calculating Social Security credits is a fairly simple prospect, but the math can get detailed. You will want to check the income eligibility for each year you worked, using the tables available on the SSA website, and calculate how many quarters you earned for each year you worked. Alternatively, you can use an online calculator offered by organizations like AARP.

Another option is to contact an experienced Social Security Disability law firm. You can use our form below to have a disability firm contact you.

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