Understanding And Maximizing Your Social Security Benefits

A simple explanation of how your Social Security benefits are calculated

How Much Will I Get From Social Security?

Social Security benefits are based on your lifetime earnings. Earnings are reported to Social Security through a W-2 form. Jobs that you’ve worked and were paid in cash aren’t reported. The Social Security Administration uses your average reported wages to determine benefits. More specifically, it is your average indexed monthly earnings (AIME) using the 35 years that you earned the most. Also, earnings are adjusted for inflation up to age 60.

The longer you wait to start taking Social Security benefits, the more you’ll get. You can begin drawing Social Security benefits at age 62. These will be the lowest benefits and are equal to 75% of your full benefit. At 65 or older, you get the basic benefit, which is also called your primary insurance amount. This is the benefit of normal retirement age.

Full benefits or 100% of your benefit occurs at age 67. You’ll get even more benefit if you wait until age 70 to retire.

How Your Benefit Is Calculated

Your Social Security benefit is calculated in three steps¹.

1. Your best earnings from 35 years are averaged and adjusted for inflation. This is your primary insurance amount (PIA).
   
   
2. Your average monthly wage is broken down into three parts:
   -90% of the first $996 of your AIME (average indexed monthly earnings)
   -Plus 32% of any amount over $996 up to $6,002
   -Plus 15% of any amount over $6,002
   
   
3. The final step to determine your benefit is the age that you begin using Social Security. Beginning at 62, you’ll get the lowest benefit. At age 67 is 100% of the benefit and age 70 more than 130%.
   

Visit ssa.gov for the most up-to-date information. If you’d like to discuss your Social Security benefits further, contact the office.

^{1 https://www.ssa.gov/oact/cola/Benefits.html}