Chris Stein, CFP®
Social Security Earnings Before Age 22
A reader from Connecticut asks about counting Social Security earnings before age 22.
“I see other references to counting earnings from the age of 22 forward, but your site notes that earnings count from the year after birth. I had military service from age 17 to 21, and those earnings are listed on my earnings record. I’m asking because I have some zero and low-earnings years on my record. My military earnings were higher than some other years, and I want to be sure they will be included.”
This “age 22” concern is a persistent one, and the answer will illustrate the complexity of Social Security. Some people don’t fully understand the wording that Social Security uses and exactly how things work under the hood. Yet they know just enough to be a little dangerous with what they’re willing to post on the internet.
So let me clarify what’s going on here.
It’s pretty common knowledge among people who have looked into Social Security that when you turn 62, it’s standard practice for Social Security to create your official Social Security benefits calculation at that point. They will consider your highest 35 years of indexed earnings. What’s less known is how they get to the number 35.
And that will answer your question.
To get to 35 years, Social Security counts the years from when you turn 22 to age 62 when you first become eligible for retirement benefits. That represents 40 years, which is considered your standard career length. They are counting the “elapsed years” between age 22 and 62 -- or the year you pass away if that should happen before you reach age 62. So that’s where the 40 comes in.
But where does the number 35 come from? Well, Social Security drops out five years – called “dropouts” – from that elapsed-year figure. So in the standard case, they drop five from 40 to get 35 – the number of years they’ll pluck out of your earnings record to determine your benefit.
Besides elapsed years, Social Security uses several other terms, such as “computation years” and “base years.” For this conversation, base years are critical because they cover all of your earnings over your entire life. They represent all the available years from which the earnings will be pulled to compute your PIA, or Primary Insurance Amount. With base years, there is no restriction at age 22. Age 22 only comes into play to come up with the standard career of 40 years but affects nothing else.
And that’s the confusion. People think that – because they’re going to count those years to get to 40, then subtract 5 to get 35 – they must also impact what years they look at for your earnings. But that is a complete misunderstanding of the rules. That’s not how it works.
If you check out your earnings record, you’ll see it goes back to the year after you were born. There might be a zero listed there. Like most of us, we didn’t earn anything that year or in the years that followed. (An exception would be the baby diaper model that Jim likes to talk about, who would have had earnings to reflect that early on.)
As you mentioned, your record shows earnings for your military years when you were 17 to 21, as it should. Therefore, Social Security will definitely consider any year in that period that makes up one of your top 35 indexed years, which you believe they will.
In terms of logic, ask yourself this: when you look up your earnings record on the Social Security website, why would they report your earnings from age 1 through 21 if they weren’t going to be used for anything? Social Security wouldn’t report them. Instead, they’d say, “Well, your important information starts at age 22, and here you go.”
Here’s a little history of how we got to our calculation method.
Age 22 has not always been the starting point in calculating elapsed years. Today’s calculation method only dates back to 1978, when the “Post-1978 Rule” was enacted. When the rule was first implemented, the calculation of elapsed years only ran from 1950 until you turned 62. If you turned 62 in 1978, only 28 years were counted, and when they dropped out five years, only 23 years were used in the calculation. But, as time passed, the number of elapsed years continued to grow until everyone used 35 years (that is, 40 minus 5).
Those days are long past. All those people affected by the transition are already collecting Social Security. And today, assuming you live until age 62, you are dealing with 35 years – even if some of those years might have zeros. (If you pass away before age 62, things change, but that’s a topic for another day.)
Hopefully, this explanation clears up the misunderstanding about the role of age 22. It’s simply a formality in how Social Security gets to 40 years and has nothing to do with the earned income used to calculate your retirement benefits.