The 35-Year Rule That Quietly Shrinks Social Security Checks for Workers With a Career Gap
A surprisingly simple rule inside Social Security's benefits formula can quietly punish workers who took time away from their careers, and millions of retirees never see it coming until their first check arrives smaller than expected.
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One big misconception about Social Security is that all retirees are eligible for the same monthly benefit. In reality, there’s a huge spectrum. The average monthly benefit today is $2,086, but some Social Security recipients collect more than $5,000 each month.
What actually happens is that your monthly Social Security benefit is based on your earnings history. And that, coupled with your filing age, determines how much Social Security you receive each month during retirement. But you should know that if you don’t have a complete work history, you may end up with less Social Security than you’d like.
How Social Security’s 35-year rule works
The more money you make during your career, up to a certain point, the more Social Security you can get each month in retirement. But working for at least 35 years matters, too.
The Social Security Administration (SSA) bases those monthly checks on your 35 most profitable years in the workforce. But what this means is that if you don’t have 35 years of earnings on record, you’ll have a $0 factored into your benefits formula for each year you didn’t work. And multiple $0-income years could lead to a lower retirement benefit, even if you had strong earnings in other years.
Of course, it’s easy to see why someone might reach retirement age without 35 years of work. You might take time off to raise children or care for an aging family member. Multiple rounds of layoffs at different points in your career could also lead to a situation where you’re ready to claim Social Security but don’t have 35 years of earnings on record.
Also, if you had an illness to contend with that sidelined you for several years, you may be a little shy of 35 working years by the time you want to claim Social Security. Unfortunately, that could impact your benefits in a negative way. But there may be something you can do to make up for it.
Working while collecting Social Security could help
If you’re ready to claim Social Security but don’t have 35 years of work under your belt, there may be a way to boost your benefits after filing for them. If you continue to work while you’re on Social Security, any earnings you receive in future years can replace $0 income years in your benefits formula.
Let’s say you claim Social Security at full retirement age (FRA) but only have 32 years of earnings to your name at that point. If you then work part-time for three more years, the SSA will account for that income after you earn it and recalculate your benefits to give you credit for it. In other words, you should see your benefits go up after earning that money.
Plus, once you reach FRA, you can earn any amount of money from a job without having to worry about having Social Security withheld under the program’s earnings test rules. So you have lots to gain by working part-time later in life if you don’t have 35 years of earnings already.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
