How credits are earned

When you work and pay Social Security taxes, you earn up to a maximum of four "credits" for each year. The way you earn a credit has changed over the years.

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

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

The amount of earnings it takes to earn a credit has changed since 1978. In the year 2012, you must earn $1,130 in covered earnings to get one Social Security or Medicare work credit and $4,520 to get the maximum four credits for the year.

Note: 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.

During your lifetime, you probably will earn more credits than the minimum number you need to be eligible for benefits. These extra credits do not increase your benefit amount. Your average earnings over your working years determine how much your monthly payment will be.

Click on the following topics for more information about the number of:

• Credits needed for retirement benefits
• Credits needed for disability benefits
• Credits needed for survivor benefits