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Taking Care of Mom and Dad: Earning Credits

Earning the credits to qualify for Social Security is key. These credits are what allow your parents to collect the benefits they have paid for their whole working lives. People earn Social Security credits when they work in a job in which they pay Social Security taxes. The credits are based on earnings.

During your parents' working years, their wages were posted to their Social Security earnings record, and they received earnings credits based on those wages. Credits also determine their eligibility for disability or survivors benefits if they should become disabled or die.

Each year the amount of earnings needed for a credit goes up as average earnings levels increase. In 2003, a person would receive one credit for each $890 of earnings, up to the maximum of four credits per year.

The credits earned remain on a Social Security record even if there is a change in jobs or there's no earnings for a while.

If your parents were -- or are -- self-employed, they earn Social Security credits the same way employees do (one credit for each $890 in net earnings, but no more than four credits per year). However, special rules apply if they have annual earnings of less than $400.

Not all employees work in jobs covered by Social Security. The following types of employees don't get the same credits as others:

  • most federal employees hired before 1984 (but since January 1, 1983, all federal employees have paid the Medicare hospital insurance part of the Social Security tax);
  • railroad employees with more than 10 years of service; or
  • employees of some state and local government agencies that never elected to participate in Social Security.

However, if your parents were or are in the military, they earn Social Security credits the same way civilian employees do. They also may receive additional credits under certain conditions -- contact your local Social Security or Veterans' Affairs office for details.

The number of credits your parents need to be eligible for benefits depends on their ages and the type of benefit in question. The great majority of baby boomer parents easily qualify for benefits, but to document, here are the details:

Anyone born in 1929 or later needs 40 credits to be eligible for retirement benefits. People born before 1929 need fewer credits.

For disability benefits, your parents' age and the time when one or both became disabled is important. The following chart shows the number of credits needed per age group:

Disabled At Age Credits Needed
50 28
52 30
54 32
56 34
58 36
60 38
62 or older 40

Remember the most credits you can earn in a year is four.

Your parents must have earned at least 20 of the credits in the 10 years immediately before they became disabled. (Later in this chapter we'll take a closer look at the mechanics of disability.)

Survivor benefits work a little differently. The family of a deceased worker can qualify for survivor benefits even though the deceased worker had fewer credits than needed for retirement benefits.

If your dad dies and you are still a dependent, you may get survivors benefits if your dad had six credits in the three years before his death. These benefits could continue until you reach age 18 (or age 19 if you're still in school full-time). Your mom, as a widow caring for dependent children or disabled, might also be able to get benefits.

Of course, these rules usually don't mean much to baby boomers who are well-established on their own, are not considered dependents and have parents who easily qualify for Social Security. But, if you have younger siblings, these rules may apply to them.

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