Social Security Points

 

Social Security Points

You must earn 40 Social Security Credit to qualify Social Security benefits. Credit is earned when you earn and pay social security taxes. You can either earn this as an employee or as a self employed individuals. Employer must match your deduction and that will go towards your social security account.

However there is limit to the deduction. The income is limited to certain threshold. You social security is not deducted once you hit the ceiling.  This annual limit is called the contribution and benefit base. For the year 2023, the limit is $160,200. For 2022 it was $147,000. In simple word social security is deducted for maximum of $9,932.40 for the year 2023. The limit is decided based on national average wage index.

How do you earn social security points?

You earn social security points when you earn certain amount of wages each year. You can earn only up to 4 point in a year. To reach your 40 points, you need to put in social security taxes for 10 years. The credit is not based on time you worked during the year. You may earn 4 credits in a month or you can work though out the year to earn the credit. How much you earn during the year gives you the credit, not the hour or time.

For 2023, you earn 1 Social Security and Medicare credit by earning $1,640, and to make it 4 credits you need to earn $6,560. The earnings you made must have Social Security and Medicare paid.

Current rate of social security is 6.2% plus 1.45% of Medicare and same percentage of contribution your employer has to make. If you are self-employed you will put 12.4% by yourself. Including Medicare it become 7.65% and 15.3%.

You might earn more credit in your life time but these points do not increase you social security benefits, but the average earnings over your working years will fix your benefits at the retirement.

Earning required for one Social Security point for few years:

2023 - $1,640

2022 - $1,510

2021 - $1,470

2020 - $1,410

2019 - $5,440

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