What Is The Minimum Social Security Benefit?

As a family caregiver, you have a lot on your plate. Balancing the needs of your loved one with your responsibilities can be overwhelming. Checking that your loved one has enough money for retirement will help them live a long and productive life. Social Security benefits provide necessary income for millions of aging adults. What do family caregivers need to know?

Social security benefits

Social Security benefits are government-provided payments to eligible individuals and their families, primarily aimed at supporting retirees, disabled workers, and survivors of deceased workers. Funded through payroll taxes, these benefits offer a financial safety net, ensuring a basic level of income during retirement, disability, or after the loss of a wage-earning family member. Social Security also includes Medicare, which provides healthcare coverage for seniors and specific disabled individuals.

When your care recipient reaches retirement age or becomes disabled, they can begin receiving monthly benefits based on your lifetime earnings history.

Two paths to retirement benefits

There are two primary ways to qualify for Social Security retirement benefits:

Regular Social Security Benefit

‍This is the most common path, based on the care recipient's average monthly earnings over their 35 highest-earning years. The Social Security Administration (SSA) calculates a Primary Insurance Amount (PIA) based on this average, which represents the base monthly benefit at full retirement age (FRA).

Special Minimum Social Security Benefit

‍This benefit is designed for low-income earners with a long history of working in covered employment. Unlike the regular benefit, it is not based on earnings but on the years worked and cost-of-living adjustments.

Minimum Social Security benefit

Factors that affect the minimum benefit amount

• Years of coverage: The special minimum benefit is designed for individuals who have worked in covered employment for many years but had low earnings. The amount you receive is based on the years you have worked and paid into Social Security. Typically, you need at least 11 years of coverage, but the benefit increases with each additional year up to a maximum of 30 years.
• Cost-of-living adjustments (COLAs): The minimum benefit amount is subject to annual cost-of-living adjustments, which help ensure that the benefits keep pace with inflation. These adjustments are determined by changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
• Retirement age: The age at which you claim Social Security benefits affects the amount you receive. If you claim benefits before reaching full retirement age, your benefits will be reduced. Conversely, delaying benefits beyond the full retirement age can increase the benefit amount up to age 70. However, these reductions may affect the special minimum benefit less than the regular benefit.
• Earnings record: Although the special minimum benefit is not directly based on your earnings, your work history and the consistency of your employment impact your eligibility and the number of years credited. The more years you have worked in covered employment, the higher your minimum benefit will be.
• Other benefits: If you are eligible for other benefits, such as spousal or survivor benefits, these may affect your minimum benefit amount. The Social Security Administration will pay the higher of the two benefits, so if your spousal or survivor benefit is higher than your minimum benefit, you will receive the higher amount.

Eligibility for the minimum social security benefit

The Special Minimum Benefit is a safety net for low-income individuals with a substantial work history. What are the criteria?

• Age requirement: To claim any Social Security benefit, including the minimum benefit, recipients must be at least 62 years old.
• Work credits: To qualify for benefits, adults must earn minimum Social Security credits through their Social Security taxes. In 2024, adults earned one credit for every $1,730 in covered earnings, up to a maximum of four credits per year.
• Years of coverage (YOCs): To be eligible for the minimum benefit, your loved one must have at least 11 years of coverage. A year of coverage is earned when earnings in a given year reach a specific threshold set by the SSA. The more years of coverage they have (up to 30), the higher the minimum benefit amount.

Impact of disability on eligibility for the minimum benefit

The impact of disability on eligibility for the Special Minimum Benefit involves several considerations:

1. Disability credits: Individuals who become disabled before accumulating the required work credits may still be eligible for Social Security Disability Insurance (SSDI). The number of work credits needed depends on the age at which the individual becomes disabled. Generally, younger workers need fewer credits to qualify for SSDI.
2. Disability and years of overage (YOCs): If an individual receives SSDI, those years may count toward the Years of Coverage (YOCs) required for the Special Minimum Benefit. This can help low-income disabled workers qualify for higher benefits under the special minimum provision.
3. Benefit calculation: The Special Minimum Benefit may be applied to individuals who receive disability benefits if they meet the criteria for years of coverage. The SSA will calculate the benefit amount based on the number of YOCs, similar to retirement benefits.
4. Conversion to benefits for retirement: When a disabled individual reaches full retirement age (FRA), their SSDI benefits automatically convert to retirement benefits. If they meet the criteria for the Special Minimum Benefit, this higher amount may be applied to their retirement benefits.

How the minimum social security benefit is calculated

The calculation for the minimum benefit is more straightforward than the regular benefit. Here's the basic formula:

Special Minimum PIA = YOCs x Special Minimum Benefit Factor

The SSA adjusts the Special Minimum Benefit Factor annually to reflect inflation. In 2024, the factor ranges from $4.63 for someone with 11 years of coverage to $9.72 for someone with 30 years of coverage.

What happens if you don't earn enough credits?

If you don't have enough credits for Social Security, you generally will not qualify for retirement benefits. Social Security requires a certain number of work credits earned through payroll tax contributions to be eligible for benefits.

However, if you lack sufficient credits, you might still be eligible for Supplemental Security Income (SSI) if you are elderly, blind, or disabled and have limited income and resources. Additionally, some spouses and dependents may qualify for benefits based on a family member's work record.

Supplemental Security Income (SSI)

This is a federal program that provides financial assistance to individuals who are elderly (65 or older), blind, or disabled, and who have limited income and resources. Unlike Social Security benefits, SSI is not based on your work history or credits. Instead, it's a needs-based program intended to help those who have not worked enough to qualify for Social Security or who receive very low Social Security benefits. To qualify, applicants must meet strict income and asset limits.

Spousal benefits

If you are married to someone who qualifies for Social Security benefits, you may be eligible for spousal benefits based on your spouse's work record. Generally, spousal benefits can be up to 50% of the primary earner's benefit if you claim them at your full retirement age. This can apply to current spouses, ex-spouses (if the marriage lasted at least ten years), and, in some cases, surviving spouses.

Dependent benefits

Children and certain dependents of eligible workers can also receive Social Security benefits. Dependent children under 18, or up to 19 if still in high school, and disabled adult children whose disability began before age 22 can receive benefits based on their parent's work record.

Survivor benefits

If a worker who has earned sufficient Social Security credits passes away, their surviving spouse, children, and sometimes even dependent parents may be eligible for survivor benefits. These benefits are based on the deceased worker's earnings record and are designed to provide financial support to the family.

Proposed changes to the minimum social security benefit

There have been recent discussions and proposals regarding changes to the minimum Social Security benefit to address concerns about the adequacy of benefits for low-income workers. Some of the proposed changes include:

1. Increasing the minimum benefit amount: Proposals have been made to raise the minimum benefit amount to ensure that it more effectively lifts long-term low earners out of poverty. This would provide a higher base benefit to those with a significant work history but low lifetime earnings.
2. Adjusting eligibility criteria: Some proposals suggest lowering the required years of coverage (YOCs) to qualify for the minimum benefit, making it more accessible to individuals who have worked intermittently or in low-wage jobs.
3. Enhanced cost-of-living adjustments (COLAs): There are suggestions to provide more generous or targeted COLAs for the minimum benefit, ensuring that benefits keep pace with actual living costs and inflation, especially for vulnerable populations.
4. Improving benefits for caregivers: Proposals have been made to credit caregivers with additional work credits for time spent out of the workforce to care for children or elderly family members. This would help ensure that individuals, particularly women, who take time off for caregiving do not face reduced Social Security benefits.
5. Expanding the special minimum benefit: Some proposals advocate for a broader application to include more low-income workers, regardless of their specific work history, to provide a stronger safety net.

While these changes are under discussion, any modifications to Social Security benefits will still require legislative action and approval by Congress. The outcome and timing of such proposals are uncertain and depend on the political and economic climate.

Making informed decisions

When determining the best Social Security benefit path for your loved one, consider their lifetime earnings, full retirement age, and cost-of-living adjustments. The minimum benefit might be preferable if they have a long work history with consistently low earnings.

Waiting until full retirement age (usually 67) can result in a higher monthly payout for either benefit type. Both benefit paths receive annual cost-of-living adjustments to keep pace with inflation.

As a caregiver, you can assist your loved one in making informed Social Security decisions by:

1. Gathering documents: Collect past paystubs or W-2 forms to estimate lifetime earnings and potential benefits.
2. Using online tools: The Social Security Administration's online calculator allows you to estimate benefits under regular and special minimum formulas.
3. Seeking expert advice: Consult a Social Security benefits specialist or financial advisor for personalized guidance.

A note from Givers

Understanding Social Security benefits empowers you to advocate for your loved one. Remember to review income and expenses regularly to make any needed adjustments. Feel free to use the SSA's resources for guidance and assistance. This ongoing process secures your loved one's financial stability, providing peace of mind for the whole family.