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.
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:
- 90 percent of the first $1,024 of your AIME;
- plus 32 percent of any amount over $1,024 up to $6,172;
- plus 15 percent of any amount over $6,172.
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
- The SSA recalculates your benefit annually, adjusting for inflation and figuring in the previous year’s income.
- If your previous year’s income ranks in your top 35 years of earnings, Social Security will shove aside a lower-earning year. That means your average monthly earnings figure will go up.
- If you worked fewer than 35 years, Social Security credits you with zero earnings for each year up to 35.
Your Retirement Age and When You Stop Working (En español)
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.If You Stop Work Before You Start Receiving Benefits
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.
If You Stop Work Between Age 62 and Your Full Retirement Age
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 Age
If you choose to work beyond your full retirement age, you have two options:
You can work and get full retirement benefits no matter how much you earn.
You can delay getting retirement benefits and earn credits that increase your benefit amount.
The best way to start planning for your future is by creating a my Social Security account online. With my Social Security, you can verify your earnings,
get your Social Security Statement, and much more – all from the comfort of your home or office. We have a variety of calculators to help you plan for the future or to assist you with your needs now. These tools can be accurate but require access to your official earnings record in our database. The simplest way to do that is by creating or logging in to your my Social Security account. The other way is to answer a
series of questions to prove your identity.Benefit Calculators (En español)
Online Benefits Calculator
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