Can I Buy Social Security Credits for Retirement?

Social Security offers financial security to retirees, those with disabilities, and survivors. Many people misunderstand that Social Security credits, which are necessary to qualify for benefits, cannot be directly bought. Instead, this program operates through a system of earned credits, accrued over a working lifetime.

Understanding Social Security Credits

Social Security credits are units earned through covered employment or self-employment. These credits are not a commodity that can be bought. Instead, they are an accounting measure used to determine eligibility for various Social Security benefits, including retirement, disability, and survivor benefits. The number of credits accumulated signifies whether an individual has met the minimum work requirements established by the Social Security Administration.

These credits are crucial for establishing eligibility but do not directly influence the amount of benefits received. Benefit amounts are primarily calculated based on an individual’s average indexed monthly earnings over their highest-earning years. Therefore, while credits open the door to benefits, the earnings record determines the size of the monthly payment.

Earning Social Security Credits

Credits are earned by working and paying Social Security taxes, known as FICA taxes for employees and SECA taxes for self-employed individuals. For 2024, an individual earns one Social Security credit for every $1,730 in covered earnings; this increases to $1,810 per credit in 2025. This amount is adjusted annually.

You can earn a maximum of four credits each calendar year. To achieve the maximum four credits, total annual earnings must reach at least $6,920 in 2024, increasing to $7,240 in 2025. These credits are permanently recorded on your Social Security earnings record and do not expire.

FICA taxes are split between an employee and their employer, with each paying a portion of the Social Security and Medicare taxes. Self-employed individuals are responsible for paying both the employee and employer portions through SECA taxes.

Impact of Insufficient Credits

Not accumulating enough Social Security credits can prevent an individual and their family from qualifying for benefits. To be eligible for retirement benefits, most individuals need a total of 40 credits, which equates to about 10 years of work. These credits do not need to be earned consecutively; past credits remain on your record until the 40-credit threshold is met.

Eligibility for Social Security Disability Insurance (SSDI) depends on age at the onset of disability, requiring both a recent work test and a duration work test. For instance, individuals becoming disabled before age 24 may qualify with as few as six credits earned in the three years prior to disability. For those aged 31 or older, at least 20 credits earned in the 10 years immediately preceding the disability are required.

Survivor benefits, paid to qualifying family members after a worker’s death, also rely on the deceased’s work credits. The number of credits needed varies with the worker’s age at death, with younger workers requiring fewer credits. In some cases, a special rule allows benefits if the deceased had six credits in the three years before their death.

Strategies for Retirement Income

While Social Security provides a foundation for retirement income, it is often not sufficient to cover all living expenses. Individuals can enhance their financial security through various supplementary retirement savings vehicles. Employer-sponsored plans like 401(k)s are a common option, allowing pre-tax contributions that grow tax-deferred until retirement. Many employers offer matching contributions, providing additional funds to your retirement savings.

Individual Retirement Accounts (IRAs), including Traditional and Roth IRAs, offer another avenue for personal savings. Traditional IRAs provide tax-deductible contributions and tax-deferred growth, while Roth IRAs allow after-tax contributions with tax-free withdrawals in retirement, provided certain conditions are met. These accounts offer flexibility and control over investment choices, complementing Social Security benefits.