Should Social Security's minimum benefit go up?

Social Security is a key source of income for many Americans, and a huge portion of the retired population of the U.S. gets the majority of the cash they need to pay their living expenses from Social Security. Recently, the presidential election campaign has pulled Social Security into the forefront, and candidates have taken positions regarding potential expansion of Social Security to provide greater minimum benefits for participants. Yet before policymakers look to implement changes, it's important to understand the current provisions for Social Security minimum benefits. Let's look at the details of the Social Security minimum benefits the program currently provides and then turn to proposals that might expand their coverage.

What Social Security minimum benefits are currently available?

For many retirees, there is no minimum amount for a Social Security monthly benefit. The formula that the Social Security Administration uses to calculate the primary insurance amount on which your monthly benefit is based looks at your average monthly earnings over the course of your 35 top-earning years, indexed for inflation. If your work history is shorter than 35 years, then the extra years during which you didn't work get filled in with zeros. As a result, those who have worked only a short portion of a full career can have very low average earnings, and that can create low monthly payments.

For example, say you worked five years earning $2,000 per month and then chose to leave the paying workforce. Your total earnings would be $120,000, and when you divide that figure over 35 years, you'd get average earnings of about $285 per month. That would equate to a primary insurance amount of $257, meaning that you'd get $257 per month in Social Security benefits if you retire at full retirement age.

However, Social Security does have what's known as a Special Minimum Benefit. In order to qualify, you have to have worked for at least 11 years. As you can see from the table below, the minimum benefit is based on a primary insurance amount that varies depending on how many years of creditable work you have in your career.