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