What Lower-Income Workers Should Know About Social Security Payments

Social Security payments are calculated based on your 35 highest-earning years, so the amount you receive depends on when you were born, when you start collecting, and how much you earned during your working life. For lower-income workers, the formula actually pays a higher percentage of your pre-retirement earnings than it does for higher earners — this is built into how the system works. Understanding when to claim, what credits you may have earned, and how work affects your payments can mean the difference between a tight budget and one with a little more room.

The decisions you make about Social Security are largely permanent. Once you claim, you cannot undo it. If you claim at 62, your monthly payment will be roughly 30 percent lower than if you wait until your full retirement age, and 57 percent lower than if you wait until 70. For lower-income households, where every dollar matters, this timing decision shapes your finances for decades.

Key Takeaways

  • Your Social Security payment is based on your 35 highest-earning years, and years with no income count as zeros, so any year you worked increases your benefit.
  • Claiming at 62 gives you a smaller monthly payment than waiting until your full retirement age or 70, and the difference compounds over time.
  • If you have a spouse or ex-spouse, you may be able to receive a payment based on their earnings record even if you never worked or worked very little.
  • Working while receiving Social Security before your full retirement age reduces your payment by $1 for every $2 you earn above a yearly limit, but those withheld payments are credited back later.
  • The Social Security Administration can walk you through your specific situation by phone at 1-800-772-1213, and this conversation costs nothing.

How Your Social Security Payment Is Calculated

The Social Security Administration looks at your 35 highest-earning years and calculates an average monthly income from those years. If you worked fewer than 35 years, the missing years count as zeros, which lowers your average. This means that even if you took time out of the workforce — to raise children, care for a family member, or because of illness — those gaps reduce your benefit. However, every year you did work, especially at higher wages later in your career, can replace a zero-earning year and raise your payment.

The formula then converts that average into a monthly benefit using a formula that favors lower earners. If you earned $20,000 a year for 35 years, Social Security replaces a higher percentage of your income than it does for someone who earned $100,000 a year. This is intentional: the program is designed to prevent poverty in retirement, not to replace your full pre-retirement lifestyle.

You can see your own earnings record and an estimate of your future benefit by creating an account at ssa.gov. The estimate assumes you keep working at your current pace until your full retirement age. If your earnings have been very low or spotty, the estimate may be lower than you expect — but it also shows you exactly which years are counting and which are zeros.

Claiming Age and How It Affects Your Monthly Payment

Your full retirement age depends on the year you were born. If you were born between 1943 and 1954, it is 66. If you were born between 1955 and 1959, it rises by two months for each year of birth, reaching 67 for those born in 1960 or later. This is the age at which you receive your full benefit — the amount the formula calculated based on your earnings record.

You can claim as early as 62, but your payment will be permanently reduced. The reduction is roughly 6.7 percent per year before your full retirement age. If your full retirement age is 67 and you claim at 62, you receive about 70 percent of your full benefit for life. If you wait until 70, you receive about 124 percent of your full benefit. For a lower-income worker whose full benefit might be $1,500 a month, claiming at 62 instead of 67 means $450 less per month, every month, for the rest of your life.

The choice between claiming early and waiting depends on your health, your other income, and whether you can afford to wait. If you have other savings or income, or if you expect to live into your mid-80s or beyond, waiting usually results in more total money over your lifetime. If you need the money now or have health reasons to believe your life expectancy is shorter, claiming earlier may make sense. There is no universally correct answer — it depends on your situation.

Spousal and Ex-Spouse Benefits for Lower-Income Households

If you are married or were previously married for at least 10 years, you may be able to receive a payment based on your spouse's or ex-spouse's earnings record, even if you never worked or worked very little. This is called a spousal benefit or ex-spousal benefit. The payment is typically up to 50 percent of the worker's full retirement age benefit, though the exact amount depends on your age when you claim and your own earnings record.

If you are divorced, you do not need your ex-spouse's permission to claim on their record, and claiming does not reduce their benefit. You must have been married for at least 10 years, be at least 62 years old, and be unmarried. If you remarry, you lose the right to claim on your ex-spouse's record, though you can still claim on your current spouse's record if you have been married for at least two years.

For lower-income households where one spouse worked significantly more than the other, this can be a meaningful addition to household income. The Social Security Administration can tell you what you might receive based on your spouse's record. You do not need to know your spouse's exact earnings — the agency can look it up if you provide their name and date of birth.

Working While Receiving Social Security Before Full Retirement Age

If you claim Social Security before your full retirement age and continue working, your benefit will be reduced. The reduction is $1 in benefits for every $2 you earn above an annual limit. For 2024, that limit is $23,400 per year. If you earn $25,400, you lose $1,000 in benefits that year ($2 × the $1,000 you earned over the limit).

This reduction applies only to the year you earn the money — it does not permanently lower your benefit. Once you reach your full retirement age, the reduction stops, and your benefit is recalculated to account for the months you did not receive a payment. In other words, the money is not lost; it is deferred and credited back to you later as a higher monthly payment or as a lump sum.

If you are considering working while receiving Social Security, the Social Security Administration can estimate how much your benefit would be reduced in any given year. This matters for lower-income workers who may be working part-time or in seasonal jobs and need to know whether claiming now and working makes financial sense compared to waiting.

Supplemental Security Income and Other Programs for Lower-Income Retirees

Supplemental Security Income (SSI) is a separate program from Social Security. It provides additional monthly payments to people age 65 or older, or any age if they are blind or disabled, who have very low income and few assets. The income limit is roughly $943 per month for an individual and $1,415 for a couple (these amounts change yearly). If your Social Security benefit is below these limits and you have little other income, you may be able to receive SSI on top of your Social Security.

SSI also covers food, housing, and medical costs through other programs. If you receive SSI, you automatically may have access to for Medicaid in most states, which covers doctor visits, hospital stays, and prescription drugs. For lower-income retirees, this combination of SSI and Medicaid can be as valuable as the cash payment itself.

You apply for SSI at your local Social Security office or online at ssa.gov. The application asks about your income, assets, living situation, and household. Processing usually takes two to three months. If you think you might be close to the income limit, it is worth asking — many lower-income retirees do not realize they may have access to.

How to Review Your Earnings Record and Correct Errors

Your Social Security benefit is only as accurate as your earnings record. If your employer reported your wages incorrectly, or if wages were not reported at all, your benefit will be lower than it should be. You can review your record by creating an account at ssa.gov and viewing your "Earnings Record" page. It shows every year you worked and how much was reported to Social Security.

If you spot an error — a year with no earnings when you know you worked, or earnings that seem too low — contact Social Security as soon as you notice it. Bring your tax returns, W-2 forms, or pay stubs as proof. Social Security can correct errors going back several years, but the sooner you report them, the better. For lower-income workers who may have worked multiple jobs, been paid in cash, or had gaps in employment, checking this record is especially important.

If you are within three years of claiming Social Security, review your record before you apply. If you are still working, check it every few years to make sure your current earnings are being reported correctly. Errors are not common, but they do happen, and they directly affect the payment you receive for life.

Frequently Asked Questions

Can I change my mind after I claim Social Security?

You can withdraw your claim within 12 months of claiming and repay all the benefits you received. After 12 months, you cannot undo your claim, but you can suspend your benefits at your full retirement age and let them grow until 70. Suspending means you receive no payment during those years, but your benefit increases by about 8 percent per year. This is rarely the right choice for lower-income workers who need the money now.

What happens to my Social Security if I move out of the country?

You can receive Social Security while living in most countries, but not all. If you move to a country where the U.S. does not have a Social Security agreement, your benefits may stop. Before you move, contact Social Security at 1-800-772-1213 to confirm whether you can continue receiving payments where you are going. If you cannot, you may need to return to the U.S. to collect.

Do I have to pay taxes on my Social Security benefits?

If your total income is low enough, you will not owe federal income tax on your benefits. If your income is higher, up to 85 percent of your benefits may be taxable. For lower-income retirees, this is often not an issue, but it is worth checking with a tax preparer or the IRS to be sure. Some states also tax Social Security benefits, though many do not.

What if I never worked enough to get my own benefit?

If you worked fewer than 10 years, you do not have your own Social Security benefit. However, you may still be able to receive a spousal or ex-spousal benefit if you are married or were married for at least 10 years. If neither applies, you may be able to receive Supplemental Security Income (SSI) if your income and assets are low enough.

How do I know if my estimate on ssa.gov is accurate?

The estimate assumes you continue working at your current pace until your full retirement age. If your earnings have changed, or if you plan to retire earlier or later, the estimate will be different. The estimate is a starting point, not a may provide. For a personalized conversation about your specific situation, call Social Security at 1-800-772-1213 and ask to speak with a representative.