Everyone needs 40 quarters of coverage to be eligible for retirement benefits and premium free hospital insurance of Medicare. It doesn’t matter when these quarters are earned. If you earn your 40 quarters in your 20’s and 30’s and never earned another quarter you will still be eligible for retirement and premium free hospital insurance.
Keep in mind however, that when the Social Security Administration computes your benefits they will use your highest 35 years of earnings and if you don’t have 35 years of earnings they will use $0 for those years to compute your monthly benefit amount. These zeros will significantly impact your Average Indexed Monthly Earnings (AIME) and in turn reduce your monthly benefit.
How does someone earn a quarter of coverage? People often ask if they can just pay the tax and purchase a quarter of coverage. You can only earn a quarter of coverage by working for someone or through self-employment. In 2019, you will earn a quarter of coverage for every $1,360 of wages or net profit you earn. It doesn’t matter how quickly or how long it takes to earn the $1,360. You can only earn a maximum of 4 quarters of coverage in a year.
The amount of earnings needed to earn a quarter of coverage in past years is different. After 1977, quarters of coverage are based on increments of covered earnings credited to the calendar year. The following chart contains the earnings needed to earn a quarter of coverage:
Before 1978, quarters of coverage were earned differently. The Social Security Administration credits Quarters of Coverage on wages paid to an individual after 1936, or on Self-Employment income for taxable years beginning after 1950. They may use military service wage credits, or railroad compensation to establish the QCs in some cases. For years before 1978, a Quarter of Coverage is any calendar quarter beginning January 1, April 1, July 1, or October 1, in which you were paid at least $50 in wages, or credited with at least $100 of self-employment income (SEI).