What’s the minimum social security benefit?

Social Security is a primary source of lifetime retirement income for most retirees. One of the benefits that low-income workers get is the minimum Social Security benefit, which has a different calculation from the regular Social Security retirement benefit.

The minimum Social Security benefit offers an alternative method for low-income earners to determine their retirement benefits. The Social Security Administration requires workers to have at least 11 years of coverage, and meet the minimum earnings threshold to qualify for this benefit. As of 2022, a worker must have at least $16,380 in earnings to be eligible to receive the special minimum benefit.

What is the Special Minimum Benefit?

The special minimum Social Security benefit was created in 1972, and it offers retirement benefits to low-income workers. This benefit is designed to offer a higher benefit to certain low-income workers than the regular Social Security formula would produce. This means that workers who qualify for the special minimum benefit would receive bigger monthly payments than what the standard formula would pay.  

To qualify for a special minimum benefit, an individual must have at least 11 years of coverage and at least 30 years of coverage. A year of coverage represents any year in which a worker earned the minimum amount of earnings, and contributed to the Social Security Trust Fund. The minimum amount of earnings per year is adjusted yearly for inflation. For 2021, the minimum earnings threshold was $15,930, and it increased to $16,380 in 2022.

For 2022, a worker with 11 years of coverage receives a special minimum Social Security benefit of $45.50 per month, while a worker with 30 years of coverage gets a special minimum benefit of $950.80 per month. The corresponding family benefit ranges from $69.40 to $1,427.90 per month. These benefits are based on claiming payments at full retirement age.

Who receives the special minimum benefit?

The purpose of the special minimum benefit was to give long-term low-income earners a chance to get more benefits than they would be entitled to under the regular Social Security retirement benefit. This benefit is calculated using price-based inflation, while the regular Social Security benefit is calculated based on earnings.

Generally, wage growth exceeds price growth, and this explains why wage-indexed benefits are higher than the special minimum benefit. Therefore, a low-income worker would collect a bigger payment under the standard Social Security benefits calculation than when using the special minimum benefit calculation. As of 2022, the average Social Security monthly benefit for retired workers is $1,657, while the full special minimum benefit for a worker with 30 years of service is $950.

The number of low-income earners receiving the special minimum benefit has declined from 200,000 in the 1990s to 32,000 as of 2019. This means that, out of the 64 million Social Security beneficiaries as of 2019, the special minimum benefit only accounts for about 30,000 beneficiaries.

What is the minimum social security benefit at 62?

If you claim Social Security benefits at 62, your benefits will be permanently reduced by as much as 30%. This reduction applies to both the special minimum benefit and the regular Social Security retirement benefits.

For example, if you are eligible to receive $1,500 at 67 but claim benefits at 62, you will receive $1,050, which is a 30% reduction compared to the benefits you would receive at the full retirement age. This reduction is permanent, and you won't get this money back when you reach age 67. If you delay taking benefits after 67, your benefits will increase by 8% for each year you delay taking benefits after attaining the full retirement age.

If you qualify to receive the highest special minimum Social Security benefit, you can receive a monthly benefit of up to $950 at the full retirement age. If you file for the special minimum benefit at 62, you will receive $665 per month, which is a 30% reduction of the benefits. Also, there is no additional benefit if you delay taking benefits after reaching the full retirement age.

If you claim your special minimum benefit within 36 months before reaching your full retirement age, your monthly benefits will decrease by 0.555%. Also, if you claim the special minimum benefit prior to the 36-month period before reaching your full retirement age, your monthly benefits will decrease by 0.417%. 

How the minimum Social Security Benefit is calculated

The special minimum Social Security benefit is calculated based on years of coverage, usually at least 11 years of work. This benefit is based on the number of years that a worker spent in covered employment, and has earnings above a certain threshold.

The Social Security Administration sets the minimum earnings threshold that low-income workers must meet, and these thresholds are updated annually for inflation. As of 2022, the minimum earnings threshold is $16, 380, up from $15,930 in 2021.