Social Security: Why 35 Years of Work History Is the Magic Number
Most people collect Social Security without realizing a single gap in their work history can quietly shrink their monthly check for life. The formula behind your benefit is more precise than you think, and timing matters far more than most…
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There are plenty of people who collect Social Security in retirement without putting much thought into what goes into those benefits. But it’s important to understand how Social Security benefits are calculated so you can make strategic decisions on how long to work.
Let’s review how the Social Security benefits formula works, and why 35 years of earnings is the sweet spot.
Why it’s best to aim for 35 years of wages
The Social Security benefit you’re able to collect in retirement is based on both your earnings history and your filing age. Your earnings history determines your primary benefit amount, and your filing age determines whether you get to collect that benefit in full versus a smaller or larger amount.
Social Security takes your 35 highest-paid years of earnings into account when calculating your monthly benefits. Within that formula, earlier wages are adjusted for inflation.
What this means, though, is that if you don’t have a work history of 35 years or more, you’ll have a $0 factored into your benefits formula for each year you’re missing wages. Multiple years of missing wages could lead to smaller retirement benefits, which could make it harder to cover your expenses if you don’t have savings or other income streams to rely on.
How to make up for a shorter work history
Let’s say you’re nearing the end of your career and don’t have a full 35 years of earnings under your belt. You might assume you’ll have to accept a smaller Social Security benefit in retirement. But there may be steps you can take to get more Social Security.
First, you could consider extending your career. Working an extra year or two, especially during peak earning years, could boost your Social Security checks substantially.
Another option is to work part-time during retirement. Whether it’s an hourly job you do a few days a week or gig work where you’re paid as an independent contractor, wages you earn later in life could count toward your Social Security benefits formula. (With freelance work, all you need to do is report your income and pay taxes on it for it to count toward Social Security, which you’re legally required to do anyway.)
In fact, wages you earn after you’re already collecting Social Security could help increase your benefits. If you work part-time after filing for Social Security, those wages will get factored in if they replace years of $0 income.
You’re allowed to earn any amount of money from a job without negatively affecting your Social Security benefits once you reach your full retirement age. If you work while collecting Social Security prior to then, you’ll be subject to an earnings test where you risk having benefits withheld temporarily if your wages get too high.
All told, the Social Security benefit you receive as a retiree isn’t a random number. It’s based on a specific formula that accounts for your personal wage history. If you want a larger retirement benefit from Social Security, make sure to work for 35 years in some shape or form — even if some of those wages end up coming in after you’ve filed.
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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, The Washington Post, 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.
