What Happens To Your Social Security When You Have Years With Zero Earnings

Remember when we talked about how your Social Security Benefit is calculated?  Your highest 35 earning years during your career are put into a formula, and the earnings are indexed, then averaged by dividing the result by 420, the number of months in 35 years.  And if you have less than 35 years of earnings, those years become zeros…

So, you can guess what might happen when you have years with zero earnings in your record… naturally your average is going to be reduced (dramatically) by any year when you had zero earnings.

Let’s say you have 35 years of earnings at the maximum amount, which will give you (for 2011) a FRA benefit of $2,626.  But if you only had 30 years at the maximum earnings amount, your benefit would be reduced to $2,531, an annual reduction of $1,140.  Taking this further, if there were only 20 years of earnings at the maximum amount, your FRA benefit would be reduced to $2,293, for an annual reduction of $3,996.

This comes up when an individual chooses to retire early, or has years in which he or she has not earned during his or her career, such as when raising children or going to school.

About the author

Jim Blankenship, CFP®, EA

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a financial planning firm providing hourly, as-needed financial planning and advice. A financial services professional for over 25 years, Jim is a CFP professional and has earned the Enrolled Agent designation, a designation that qualifies him as enrolled to practice before the IRS. Jim is also a NAPFA-registered financial advisor, which designates him as a Fee-Only Financial Advisor.

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  • Thank you for the reply. I’ve looked at my numbers fairly extensively in the past but not recently. I can tell you that the index values used DO NOT approximate more current values. That is to say, if you paid the max in the (far) distant past, it doesn’t count for as much. This does not seem appropriate to me but who am I to say?

    I would suggest your article include a caveat that says this is an example of but one of a myriad of possibilities. Or you could just say this applies for just the most recent X years (35, 30, and 20 respectively). Just for grins, you might want to run those max’s for the 20 and 30 years being the early years and not most recent…(I semi-retired at 52 but did not understand the penalty that would incur in 1999 when I did this).

    Thanks for your insight.

  • Hi, Mike –

    It’s possible that I may have had an error in my calculations – and without your actual earnings statement from SSA it would be impossible to determine if your numbers are correct. The order of the years’ earnings would have an impact on the result as well… when I calculated these, I used the most recent 30 years at max, and the most recent 20 years at max, so that may be the differential in our calculations.

    I guess what I’m saying is that the example was purely for illustration, not for comparison to determine the correctness of your own benefit calculation. You can run the numbers on your earnings statements on the calculators on the SSA website to confirm.


  • Re: your 5 December 2010 article “What Happens To Your Social Security When You Have Years With Zero Earnings”:
    I have 27 years of the maximum amount with an additional 8 plus years of something less. My FRA benefit is $2116. This does not seem to fit in the numbers you referenced ($2626 for 35 years, $2531 for 30, and $2293 for 20 years). What am I missing? Thank you!

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