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
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. 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.
Primary Insurance AmountThe basic Social Security benefit is called the primary insurance amount (PIA). Typically the PIA is a function of average indexed monthly earnings (AIME). We determine the PIA by applying a PIA formula to AIME. The formula we use depends on the year of first eligibility (the year a person attains age 62 in retirement cases).
Because the worker in case A is first eligible for benefits in 2023, and also retires in 2023, there are no applicable cost-of-living adjustments, or COLAs, to the amount computed above. Therefore, the case-A PIA is the case A amount computed above truncated to the next lower dime, or $2,263.30. The worker in case B is first eligible in 2019 (the year case B reached age 62). Thus the case-B PIA is the case B amount computed above truncated to the next lower dime and increased by cost-of-living adjustments, or COLAs, for 2019 through 2022. These COLAs are 1.6 percent, 1.3 percent, 5.9 percent, 8.7 percent, respectively. The resulting PIA is $3,627.10. Benefit Based on PIA and AgeThe amount of retirement benefits paid depends on a person's age when he or she begins receiving benefits. We reduce benefits taken before a person's normal (or full) retirement age and we increase benefits taken after normal retirement age. We assume the worker in case A begins receiving benefits at the earliest possible age, which is age 62. Because case A's normal retirement age is 67 years, the benefit amount for case A is reduced for 60 months of early retirement. The $2,263.30 PIA is thus reduced to a monthly benefit of $1,584.00. The benefit amount for case B, assuming that benefits begin exactly at normal retirement age of 66 years and 6 months, is not reduced except for rounding down to the next lower dollar. The $3,627.10 PIA is thus reduced to a monthly benefit of $3,627.00. In addition to case B, we also have other benefit examples for workers whose earnings have equalled or exceeded maximum taxable amounts. These examples show AIME and benefit amounts for retirement at ages 62, 65, 66, 67, and 70. |
What is my social security benefit based on
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