How Much Do Military Credits Increase Social Security Benefits?

As a member of the military, you pay Social Security taxes and may draw a monthly retirement benefit as early as age 62. The tax paid by military personnel and civilian workers to fund this system is the same: 6.2 percent of wages as of 2013. However, military veterans can enhance their benefits with credits earned from active service between 1957 and 2001.

History

Military personnel began paying in to the Social Security system in 1957. For three decades, the military only contributed payroll taxes through active service. In 1988, the rules changed; Social Security contributions also began coming from pay for "inactive" service in the reserves, such as required weekend training or drills. For service up to 2001, Social Security grants additional credits for active-duty service. The amount depends on the length of your active duty, and the year in which you performed it.

Additional Earnings Credit

If you were on active duty during the period between 1957 and 1977, Social Security credits you with additional earnings. The maximum is $300 for each quarter (three-month) period you were on active duty. The maximum additional earnings would be $1,200 if you were on active duty throughout a single year. From 1978 through 2001, Social Security credits an additional $100 in earnings for every $300 in basic pay you received, with a maximum of an additional $1,200 in credited earnings in a single year.

Increased Benefits Amount

The increase in your Social Security benefit because of additional military credits depends on your lifetime earnings record from both military and civilian employment. Social Security pays benefits based on an average monthly earnings amount, which is calculated over the highest 35 years of wages. The agency applies three different percentages to this AME amount to arrive at a monthly retirement benefit figure. The additional military credits result in slightly higher average monthly earnings and a higher monthly benefit.

Indexes and Cost of Living

Social Security applies an index factor to your earnings in any particular year, to account for the regular inflationary rise in wages. For example, the index factor in 1970 is 6.95. If you earned $1,000 in that year, your indexed earnings are $6,950. If you had a full additional military credit in 1970 of $1,200, for example, then you would be credited with a total of $2,200 in earnings and your indexed earnings for 1970 would be $15,290. This number would be added to the results of the 34 other highest earnings years, and divided by 420 to arrive at average monthly earnings. Fortunately, Social Security provides an online benefit estimator that accesses your actual earnings record, and allows you to avoid doing the full calculation manually.

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