What Is The Minimum Social Security Benefit?

Among the benefits provided by Social Security, one that is less well-known is the special minimum benefit, which is designed for individuals with a long history of low earnings.

Low-income earners can make better decisions about their retirement income if they understand the Social Security special minimum benefit.

A detailed description of the special minimum benefit program is provided in this article, including its purpose, eligibility requirements, and comparison with the standard Social Security retirement benefit.

Everything you need to know is right here.

What Is The Minimum Social Security Benefit?

According to current law, Social Security’s special minimum benefit in 2025 will be $1,033.50 per month for workers with 30 years of coverage, lowering to $49.40 for those with 11 years. As wages have not grown with time, the value of the special minimum benefit has declined. Rather than receiving a higher benefit based on their own wage record, new retirees received a special minimum benefit in 1998.

Many policymakers have proposed enhanced minimum benefits aiming to increase benefits for long-term low-wage workers because of persistent poverty among retirees. It usually takes 30 years of work to receive the full benefit under these proposals. 

With an initial benefit level indexed to wages, the full benefit usually varies from 100 to 125% of poverty.  According to the Social Security 2100 Act, all newly eligible individuals receiving retirement or disability benefits will receive a minimum benefit equivalent to 125% of poverty (initial benefit indexed to wages). If a worker has fewer than 30 years of Social Security coverage, they receive a smaller benefit (indexed to inflation once awarded).

Upon permanent enactment in 2023, the proposal is estimated to cost 0.17% of payroll.

Adults with disabilities and older adults suffering from poverty

Using the supplemental poverty measure (SPM), Columbia University estimated that 37.5% of older adults were poor in 1967, a significant decline since the 1960s. In the mid-1980s, poverty rates had plateaued at around 15%, where they remained until recent years. During the pandemic, poverty rates temporarily declined. 

The Census Bureau estimates that poverty (SPM) declined to 13.6% in 2018 and reached 9.5% in 2020, before rising to 14.1% in 2022.1 For people with disabilities, improvement has been more limited. 

In 2010, Brucker and colleagues estimated poverty (SPM) among working-age adults with disabilities at 28.0%. Working age adults with disabilities were estimated to be in poverty (SPM) in 2018 at 24.5%, 18.1% in 2020, and 23.2% in 2022, according to researchers at New York University.

Comparatively, the Census Bureau estimates that poverty (SPM) among children in 2022 will be 12.4%. Based on this estimate, older adults and adults with disabilities will be more likely to be poor than children. 

Older adults who receive little or no Social Security are more likely to be poor. The poverty rate among Black and Latino older adults is particularly pronounced.  There are a number of factors contributing to this disparity, including labor market discrimination and occupational segregation into low-paying jobs. 

Home ownership rates are lower and intergenerational wealth transfers are fewer, further compounding racial differences in retirement security. Compared to white older adults, black older adults are four times more likely to live below the poverty line, and Latino older adults are more than four times more likely to live below the poverty line. 

Among older black and Latino adults, household wealth is one-fourth that of white older adults.

Social Security benefits accounted for nearly half (47%) of total family income for SSDI beneficiaries’ families in 2010 and a fifth made up 90% or more of their income in 2010.  

Disabled people often experience a decline in material well being after retirement. Chronic-severe condition sufferers experience a substantial drop in food and housing consumption as they retire, and SSDI beneficiaries reach retirement age with lower savings rates than their non-disabled counterparts..

Also check: Can Seniors On Social Security Get Food Stamps?

A modest reduction in poverty can be achieved through the Social Security 2100 Act minimum benefit proposal.

A policy of enhanced minimum benefits, such as the one described above, reduces poverty for older and disabled adults, but the reduction is modest. 

According to estimates by the Urban Institute, if the 2100 Act policy is continued through 2065, the poverty rate for older and disabled adults would reduce by 6.6%, 0.6 percentage points. Compared to a poverty baseline that is inflation-indexed, the proposal would reduce poverty by 0.3 percentage points. This modest impact can be attributed to the policy’s fundamental design features.

Low-income workers for the long run, the focus of the 2100 Act policy, are a modest portion of Social Security beneficiaries in the future. The Social Security Administration (SSA) predicts that by 2050, beneficiaries aged 60 and older with at least 30 years of low-wage work will make up only 3% of the population. 

Compared to the average, their poverty rates are not substantially higher, at 5.6% for those earning less than $10,000 a year and 4.0% for those 65 and older. Low-income Social Security beneficiaries are often out of work for long periods of time. People who are not in the labor force are mostly caregivers and people with disabilities. 

Women accounted for nearly 40% of those outside the labor force in 2016, while disabled people accounted for another 30% (equally distributed by gender). When compared with beneficiaries who haven’t had zero earnings while raising a young child, 33.3% had benefits below poverty level in 2003 while 13.4% did not have zero earnings while caring for a young child. 

Health care benefits were below the poverty level for 36.4% of people who reported poor health in 2003, as compared to 16.2% of those who reported very good health. There are longstanding inequities in the labor market and criminal justice system that cause greater career disruptions and lower earnings for workers of color.

There is an inherent challenge to the 2100 Act policy in that it can’t assist older and disabled adults who don’t receive Social Security. In 2020, the poverty rate for the 3.5% of seniors who never get Social Security benefits was staggering at 54%.  Majority of seniors who don’t qualify for benefits are immigrants or infrequent workers who don’t have enough earnings years. 64% are women, and 60% are people of color.

There is also a caution regarding the 2100 Act policy, which has very limited impact on beneficiaries who receive both Social Security and SSI at the same time. 

Current law disregards $20 in Social Security benefits and reduces the SSI benefit dollar for dollar for any additional Social Security benefits.

As a result, beneficiaries receiving both Social Security and SSI will not benefit from the enhanced minimum benefit until the benefit is sufficient to offset the loss of SSI. Based on estimates by the Urban Institute, only 16% of concurrent beneficiaries below 125% of the poverty line would benefit from the Social Security 2100 Act policy. 

The importance of SSI and Medicaid minimum benefit policies    

In almost every case, those who are eligible for SSI are also eligible for Medicaid, a protection that is essential for many low-income individuals. In addition to Medicare, Medicaid provides more generous benefits than Medicare, and 20% of older adults use Medicaid to supplement their Medicare coverage.  

In the absence of Medicaid coverage, the Kaiser Family Foundation estimates that out-of-pocket expenses can consume a significant portion of a low-income individual’s income.

In 2021, 2.6 million people were concurrently eligible for Social Security and SSI, making Medicaid’s interaction with minimum benefit policies especially important. Beneficiaries might lose eligibility for SSI and Medicaid if their Social Security benefit is increased.  According to Johnson, 17% of SSI recipients would lose their full Medicaid benefits if Social Security implemented a minimum benefit policy. As a result, the number of older and disabled workers who are eligible for Medicaid is increased by enhanced SSI benefits, as described below. 

Also check: What Happens If I Don’t Get 40 Credits For Social Security?

Poverty reduction through SSI

A majority of SSI benefits go toward reducing poverty, with over 80% of recipients being poor before receiving benefits.  

With SSI, households living in poverty decline from 63% to 42%, and families living below 150% of the federal poverty level decrease from 75% to 64%.

Improvements to SSI policies

In addition to assisting a larger number of low-income older and disabled adults, expanding SSI can also accomplish efficiencies through income tests inherent in the program, resulting in greater poverty impact than the enhanced minimum benefit policy discussed above.

The three themes we propose for improving SSI can be grouped into three categories. The first is broadening benefits so that program participants usually earn enough to meet or exceed the poverty line. Secondly, enhanced policies to recognize past contributions to Social Security trust funds. Third, simplifying the program to increase participation and reduce SSA’s operating costs.

To estimate how much a package will cost, point estimates are needed for each policy. However, policies interact and a more expansive policy in one area may affect other policies. As a result, a range of values can be considered on a policy basis. 

As a result of the SSI Restoration Act, the actuaries estimated in 2021 that these policies would cost $510 billion over ten years. The majority of the cost would come from raising the maximum federal SSI benefit to the poverty line, the Federal Benefit Rate (FBR). Given that Congress must address other policies of importance to older and disabled adults, including improving long-term care services and supports, a proposal of this magnitude is unlikely to pass.

An individual’s SSI benefit of $943 a month in 2024 is modest. If this benefit were an individual’s only source of income, it would put them at 75% of poverty. By combining SSI and SNAP policies, this proposal would raise the overall resources of most SSI beneficiaries above the poverty line. 

The SSI rules do not recognize the interaction between SSI and Social Security, which is discussed further in previously published works. For example, concurrent beneficiaries can only retain $20 per month from Social Security. 

Changes need to be made to how SSI and Social Security interact in order to support low-income workers as a result of their contributions to the workforce and tax payments. SSI’s disregard rule can be changed to maintain the benefit-contribution link between Social Security and SSI. 

As part of this proposal, the existing disregard for general income would be increased to $60, indexed to inflation, and a 40% disqualification would be added to the Social Security benefits when calculating SSI benefits. It is clear that the earned income principle is reflected more clearly with a larger disregard, since a portion of benefits are awarded based solely on the worker’s previous earnings history. 

SSI beneficiaries who receive partial benefits below the FBR are also supported by this disregard. By using the percentage component of the disregard, a dimension of fairness is introduced, since workers receive additional disregarded benefits in proportion to the amount of taxes they contribute to Social Security trust funds. A future brief will consider the implications of this proposal for Medicaid.

Here are some policies to improve SSI. The SSI program currently has rules that are not indexed for inflation, which discourage participation and are expensive for SSA to administer. 

• Expand the SSI asset eligibility limits. As proposed in the SSI Savings Penalty Elimination Act, increase the assets limit for individuals from $2,000 to $10,000 and for couples from $3,000 to $20,000ct. In 2024, SSA actuaries estimated that this policy would cost $9.8 billion over ten years. They also excluded $50,000 in dedicated retirement savings accounts for individuals and $75,000 for couples. Initially, the retirement account limit would be applied, allowing account values to fluctuate in line with market changes.
• Raise the earned income disregard from $65 to $200 in 2027 and index it based on inflation. SSI currently begins reducing SSI benefits at 50% even before a beneficiary earns enough from SSI and earnings to meetve the poverty line.
• Remove the in-kind support and maintenance requirements in SSI. These requirements are time-consuming and difficult to enforce, resulting in unnecessary errors.
• Hold SSA harmless for fluctuating earnings or assets between SSI redeterminations. There would be a substantial reduction in harmful overpayments under this policy.
• Increase The participation rate in SSIes. Utilizing the same mechanism that lowers Medicare premiums for low-income Medicare beneficiaries, requires the Social Security Administration to send an annual notice to all individuals who meet the SSI income eligibility threshold, but are not enrolled in the program. An individual may be eligible for SSI based on their income, if they meet asset limitations set by the Internal Revenue Service (IRS) and Social Security Administration (SSA). Because of the automatic assessment of income eligibility, more people will access SSI benefits due to the automatic assessment of income eligibility. As part of the proposed SSI enrollment reform, the existing highly complex enrollment process would be simplified and streamlined.

It is especially dependent on the size of the increase in the FBR that these policies are priced. It is evident that the policies described above will substantially increase a beneficiary’s overall income over the poverty line for virtually all beneficiaries with concurrent Social Security and SSI benefits.

FBR increases can be fully offset by other proposals that will be presented in subsequent papers, enabling a comprehensive package of SSI improvements. To avoid obstacles in Congress, improvements to SSI must be offset by savings elsewhere or revenue increases.

The strengthening of SSI is a significant advantage over the minimum benefit policies of Social Security

Targeting and efficiency  

A policy aimed at reducing poverty should consider all of an individual’s major sources of income both to enhance efficiency and to provide equity across individuals with different sources of income.  There are several million Social Security beneficiaries who receive income from non-covered work.

Of those receiving Social Security benefits, 66.7% receive Social Security benefits and 22.1% have pension, retirement, or capital income. While SSI benefits are adjusted for other sources of income, Social Security minimum benefits are not.. 

The expansion of SSI is more in line with the key principles of social insurance

The link between tax contributions and social insurance benefits is one of the fundamental characteristics of social insurance programs in the United States.  When there are no alternatives, diluting that link can be justified if it serves broader compelling objectives.

Policies to enhance the SSI program are available as alternatives to policies to increase minimum benefits. A wide range of policies aimed at diluting the contribution/benefit link could undermine social security’s wide public support.

Calculation of the special minimum benefit under Social Security

A complex formula is used by the Social Security Administration to determine the special minimum benefit. It considers how many years of coverage you have earned and a table of minimum primary insurance amounts (PIAs). PIA values are assigned to each coverage year in this table.

You can look up the special PIA table for different years using a tool provided by the Social Security Administration. Contact Social Security if you have any questions.

Taxes can also be leveraged as additional mechanisms

Many Social Security proposals, including the Social Security 2100 Act, include policies to enhance the existing Social Security minimum benefit policy. We discussed these policies above. The income tax system has also been proposed as a way to increase Social Security benefits for those with low incomes. Here, we examine the 2016 Bipartisan Policy Center Commission’s basic minimum benefit (BMB).

A BPC BMB is a household benefit offered to OASI beneficiaries reaching full retirement age. As traditional Social Security benefits increase, the BMB would decrease.  By 2023, families with an adjusted gross income (MAGI) of $39,000 for individuals and $58,000 for couples will have their BMB reduced or eliminated.

There is no direct relationship between the BMB and the poverty line, while the MAGI tax thresholds are indexed to inflation. 

A person receiving only a traditional Social Security benefit of $280 a month in 2015 will receive a total Social Security benefit of $688 including the BMB, whereas someone receiving an $862 traditional benefit would be phased out of the BMB well before they reach the poverty line. As of 2023, the BMB supplement would be $809 for singles and $1,214 for couples. 

Although the BPC BMB is small, it significantly reduces poverty compared to the proposed Social Security 2100 Act. According to Urban Institute modeling, by 2065, the BPC BMB would reduce the poverty rate of older and disabled adults by 2.0 percentage points at a long-term cost of 0.21% of payroll, similar to the Social Security 2100 Act. By indexing poverty by inflation, the BMB reduces poverty by 1.6 percentage points.

BPC’s BMB interacts with Medicaid and SSI, which is a significant concern. BPC BMB retains current law rules for SSI, and the BPC Commission report indicates that the increase in Social Security benefits will effectively replace Supplemental Security Income (SSI) for all eligible OASI recipients above full retirement age. A loss of SSI and Medicaid can have a significant impact on many beneficiaries, as discussed earlier.

How does your benefit amount vary?

Whether you qualify for the special minimum affects your monthly payout in two main ways:

• Your working hours. 
• Working for a full 30 years will result in the highest possible monthly income. Leaving it at just 11 years will qualify you for the prorated special minimum benefit. 
• During the benefits application processes. 
• Early filing for retirement benefits will lead to lower monthly payments. For people born after 1960, the full retirement age is 67, but for those born before 1960, it’s 65.

You’ll get about 30% less if you retire at 62 and begin receiving your benefits. If you wait until 67, you’ll get about 40% more if you retire at 62 and begin receiving your benefits at 67.

Conclusion

Policies aimed at improving the financial security of older and disabled adults should also be considered as part of proposals to strengthen Social Security trust funds. Policymakers should consider low-income older and disabled adults’ life histories, especially their need to leave work frequently for health care or caregiving.

Social Security 2100 Act’s enhanced minimum benefit ignores this issue and achieves little poverty reduction as a consequence. It is important to consider the interactions between Social Security, Supplemental Security Income, and Medicaid when developing effective policies.

By enhancing the Social Security minimum benefit, beneficiaries may lose SSI and Medicaid, which can greatly reduce their overall benefits. By updating and expanding the SSI program, we can improve the lives of low-income older and disabled adults.

We need to reimagine the role of SSI, expand participation, and simplify administration. In comparison to an enhanced Social Security minimum benefit, these policies have a substantial impact on poverty.