U.S. Pensions –Q&A (Part 1)
- How Many Work Credits Do You Need to Qualify for Retirement Benefits?
You need to earn 40 work credits to qualify for Social Security retirement benefits. Typically, you earn one credit per quarter if you make a certain minimum amount, so it usually takes about 10 years of work to accumulate the required credits.
The amount of benefits you receive is calculated based on your 35 highest-earning years. If you’ve worked fewer than 35 years, the years with no income are counted as zero, which can lower your average and reduce your benefit. This means your total years of work and the amount of Social Security tax you’ve paid directly impact how much you’ll receive in retirement.
However, there’s also a cap on the taxable income for Social Security, which means there’s a limit to how much retirement benefit you can receive—even if you earn more than the cap.
- What Types of Income Are Subject to Social Security Tax—and What Aren’t?
Income Subject to Social Security Tax:
A. Wages and salary income – This includes your regular pay, bonuses, commissions, overtime, and tips.
B. Self-employment income – Net earnings from self-employment, including income from freelancers, independent contractors, and partnerships.
Key points to keep in mind:
- In 2025, the Social Security tax rate is 6.2% for employees and 6.2% for employers, totaling 12.4%. If you’re self-employed, you must pay the full 12.4% yourself.
- There’s a wage cap: In 2025, only the first $176,100 of earned income is subject to Social Security tax. Any income above that amount is not taxed for Social Security purposes.
- Medicare tax is separate. It’s 1.45% each for employee and employer, totaling 2.9%, and has no income limit.
Income Not Subject to Social Security Tax:
- Investment income, such as capital gains from buying and selling assets, dividends, and interest income.
- Rental income from real estate investments.
- How Can I Check How Much Social Security I’ve Accumulated?
You can find out how much Social Security you’ve accumulated by visiting the official U.S. Social Security Administration website at ssa.gov. Search for “My Social Security Account” and create your personal account using your Social Security Number. Through this account, you can check how many work credits you’ve earned, how many you still need, how much Social Security retirement benefit you’ve accumulated, and even how much disability benefit you could receive if needed. The site also lets you view your full earnings history, see how much Social Security tax has been withheld over the years, and verify the accuracy of your records. Additionally, you can input your spouse’s information to estimate what benefits you may be eligible for based on their work record.
- What is the Full Retirement Age?
Full Retirement Age is the age at which you’re eligible to receive 100% of your Social Security retirement benefits, as defined by the Social Security Administration. This age is based solely on your year of birth, not on when you stop working.
1943-1954: 66 years old.
1955-1959: 66-67 years old.
After 1960：67 years old.
- What’s the Earliest and Latest Age You Can Start Collecting Social Security? Does It Affect Your Benefit Amount?
- Earliest Claiming Age: 62 years old. If you begin collecting benefits at age 62, your retirement benefits will be permanently reduced. The monthly amount will be about 25%–30% lower than the full retirement benefit (the exact percentage depends on your birth year). This reduction is intended to offset the longer period over which you will receive benefits due to claiming early.
- Full Retirement Age: If you start receiving retirement benefits at your full retirement age, you will receive 100% of your benefits, known as the “full benefit.”
- Latest Age to Claim Retirement Benefits: 70 years old. Although the full retirement age is 66 or 67, Americans can choose to delay claiming benefits until as late as age 70. For each year benefits are delayed, the amount increases by about 8% (known as “delayed retirement credits”). If you delay until age 70, your benefits could be 24%–32% higher than at your full retirement age.
Note: If you continue working while receiving retirement benefits and have not reached your full retirement age, your benefits may be temporarily reduced if your income exceeds a certain limit. Retirement benefits may also be subject to federal income tax, depending on your total income level.
Spousal benefits and survivor benefits can also be claimed early, with reduced benefits available as early as age 62 for spousal benefits and age 60 for survivor benefits. However, delaying retirement benefits will not result in a higher payout for spousal or survivor benefits.
Summary: We have addressed some of the most common questions about U.S. retirement benefits, and we hope this information has been helpful. In our next article, we will continue discussing spousal benefits, survivor benefits, and taxation of retirement benefits. If you are interested in these topics, don’t miss it! Also, feel free to contact us at TransGlobal for more retirement information.
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