How Is Social Security Calculated If You Work Less Than 35 Years?
Understand how your Social Security benefits are calculated, even with an incomplete work history, and what influences your monthly payment.
Social Security benefits are a foundational element of financial planning. Understanding how these benefits are determined is important, especially for those whose work history may not align with typical career lengths. This article explains the process of calculating Social Security retirement benefits, focusing on considerations when an individual has worked less than the standard 35 years.
Qualifying for Social Security Benefits
To become eligible for Social Security retirement benefits, individuals must earn “work credits.” These credits measure an individual’s work history and contributions to Social Security through payroll taxes. The Social Security Administration (SSA) uses these credits to establish eligibility for retirement benefits.
Work credits are earned based on total annual wages or self-employment income. In 2025, an individual earns one Social Security credit for every $1,810 in covered earnings. A maximum of four credits can be earned in any given year, meaning an individual must earn at least $7,240 to receive the full four credits.
For retirement benefits, most individuals born in 1929 or later need to accumulate 40 work credits, which typically equates to 10 years of working and paying Social Security taxes. Earning more than 40 credits does not increase the monthly benefit amount. The number of credits solely determines eligibility, while the benefit amount is based on lifetime earnings.
Calculating Your Average Indexed Monthly Earnings
The calculation of Social Security benefits begins with determining an individual’s Average Indexed Monthly Earnings (AIME). This process adjusts past earnings to account for changes in national average wage levels, ensuring earlier earnings reflect current economic value. The National Average Wage Index (NAWI), calculated annually by the SSA, is used for this indexing. Earnings are indexed up to two years before the individual becomes eligible for benefits.
The SSA uses an individual’s 35 highest-earning years, after indexing, to calculate the AIME. If an individual has worked more than 35 years, only the 35 years with the highest indexed earnings are included.
When an individual has worked fewer than 35 years, any years short of 35 are counted as zero-earning years in the AIME calculation. These zero-earning years directly lower the overall average, which can result in a reduced monthly benefit amount. For example, someone with only 25 years of earnings would have 10 years of zero earnings averaged into their calculation.
Once the 35 highest indexed earning years (including any zero-earning years) are identified, their total sum is divided by 420 months (35 years multiplied by 12 months). The result of this division is the Average Indexed Monthly Earnings, which then becomes the basis for determining the actual monthly benefit.
From Average Earnings to Your Monthly Benefit
The Average Indexed Monthly Earnings (AIME) serves as the foundation for calculating an individual’s Primary Insurance Amount (PIA). The PIA represents the monthly benefit an individual would receive if they begin receiving retirement benefits at their Full Retirement Age (FRA). At full retirement age, the benefit is neither reduced for early claiming nor increased for delayed claiming.
The conversion of AIME to PIA uses a progressive formula involving “bend points.” This formula divides the AIME into segments, applying different percentages to each. Bend points are adjusted annually based on changes in average wages. This progressive structure ensures lower-income earners receive a higher percentage of their pre-retirement earnings in benefits compared to higher earners.
For individuals eligible for Social Security in 2025 (turning age 62), the bend points are $1,226 and $7,391. The formula applies 90 percent to the first $1,226 of AIME. For the portion of AIME between $1,226 and $7,391, 32 percent is applied. Finally, 15 percent is applied to any AIME amount exceeding $7,391.
The sum of these calculations yields the Primary Insurance Amount. While the PIA is the basic monthly benefit, the actual amount an individual receives can be higher or lower. This variation depends on the age at which they choose to begin collecting benefits, whether before or after their full retirement age.