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Chapter 11. Social Security > Eligibility and Benefit Calculations

Eligibility and Benefit Calculations

Just about all of us are in the Social Security system (some government employees are not covered by Social Security), yet a surprisingly large number of people do not know the rules pertaining to eligibility for Social Security retirement benefits. The amount you receive at retirement is based upon your earnings averaged over most of your working career. To be fully covered for Social Security, you must have paid into the system for 40 quarters of coverage, or QCs as they are referred to in the Social Security regulations. Some people mistakenly believe that quarters of coverage refer to quarters of the work year, and in fact, at one time, this was correct. Before 1978, employers reported wages to the Social Security Administration every three months. At that time, a worker got a QC, or credit, if he or she earned at least $50 during that three-month period. In 1978, employers started reporting earnings only once a year.

Credits are now based upon the total amount of your earnings during the year regardless of when you worked during the year. For 2003, you receive one QC or credit for every $890 you earn, but the maximum amount of credits you can get in a year is limited to four. To get the maximum four credits for the year, you need only earn $3,560 in 2003. These figures are subject to change. For the most current amounts, go the Social Security website listed in Favorite Websites at the end of the book.


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