Throughout your working life, you accumulate an earnings record (sometimes called a work record). That’s the foundation the Social Security Administration (SSA) uses to calculate your benefits, using a three-step process. Show First, Social Security adjusts your earnings for historical changes in U.S. wages, takes your 35 best-paid years and produces what it calls your average indexed monthly earnings (AIME). Only income up to the maximum taxable earnings — the annually adjusted cap on how much of your earnings are subject to Social Security taxes — is counted. (The maximum taxable earnings in 2022 are $147,000.) Second, they apply a formula to that monthly average to determine your primary insurance amount (PIA) — the amount you’ll get each month from Social Security if you claim benefits at your full retirement age. That's 66 and 4 months for people born in 1956, gradually rising to 67 for people born in 1960 or later. The formula breaks down your average monthly wage into three parts. In 2022, it is:
The sum of those three figures is your PIA, also known as your full retirement benefit. The sliding scale is designed to weight the benefit to help low-wage earners, who need retirement money the most. Finally, the SSA plugs in the age at which you claim benefits. They take a bite from the full benefit if you are younger than full retirement age — you can lose more than a quarter of your benefits by starting Social Security at 62, the earliest possible age. But they add to your benefit for each month between full retirement age and 70 that you delay claiming benefits. You can gain up to 32 percent extra in benefits this way. Keep in mind
Your retirement age is the age you begin receiving Social Security retirement benefits. For many people, this is not the same age you’ll stop working. The age you stop working can affect the amount of your Social
Security retirement benefits. We base your retirement benefit on your highest 35 years of earnings and the age you start receiving benefits. If you stop work before you start receiving benefits and you have less than 35 years of earnings, your benefit amount is affected. We use a zero for each year without earnings when we calculate the amount of retirement benefits you are due. Years with no earnings reduces
your retirement benefit amount. Even if you have 35 years of earnings when you stopped working, some of those years may be low-earning years. When you file for retirement benefits, those years are averaged into your calculation, creating a lower benefit. However, if you had continued to work, your low earning years are replaced with your high earning years. Higher earnings increase your benefit amount. You can stop working before your full retirement age and receive reduced benefits. The earliest age you can start receiving retirement benefits is age 62. If you file for benefits when you reach full retirement age, you will receive full retirement benefits. If You Stop Work After Full Retirement AgeIf you choose to work beyond your full retirement age, you have two options:
Estimate your retirement benefits at different ages and dates. Your personal my Social Security account gives you secure access to information based on your earnings history and interactive tools tailored to you. With your my Social Security account, you can plan for your future by getting your personalized retirement benefit estimates at age 62, Full Retirement Age (FRA), and age 70. You can also view retirement benefit estimates by:
Your retirement estimates are provided in both written and chart form. Already have a my Social Security Account? Sign in to your account, scroll down to the Plan for Retirement section and follow these simple step-by-step instructions. Don't have a my Social Security Account? Creating a free my Social Security account takes less than 10 minutes and you get access to many other online services. Plan for your future. Manage the present. Still have questions?If you have questions or need help, call our toll-free number at 1-800-772-1213 or visit your local Social Security office. If you are deaf or hard of hearing, call our toll-free TTY number, 1-800-325-0778, between 8:00 a.m. and 5:30 p.m. Monday through Friday. |
How are social security benefits calculated for retirement
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