How To Calculate Social Security Benefits | 3 [Easy] Methods Inside

Retirement can be an exciting time, but it can also be scary for some. You might be wondering whether you have put enough money away for retirement. Everyone wants to make sure that they have enough income during retirement to continue to pay for their expenses. Since most retirees will rely – at least partially – on Social Security benefits, it is imperative that they know how much money they will be receiving from the Social Security Administration upon retirement. Thankfully, there are a few ways that you can estimate the amount of your retirement benefits. If you are approaching retirement age, then you can go ahead and estimate your benefits so that you can plan and budget accordingly when you are ready to leave your full time employment.


Ways To Estimate Your Social Security Benefits

Many people really have no idea how Social Security works or how their benefits are calculated. There is more than one way to calculate your monthly benefit amount. You have likely paid tens of thousands of dollars in Social Security taxes during your working years, so now it is time to determine how much of that money you will get back in retirement. If you are wondering, “How much SS will I get,” then here are three ways to calculate your Social Security retirement benefit.


Visit Your Local Social Security Office

Your local Social Security office will be able to give you a benefit estimate if you go and request it. You will need to take proper identification so that the agents there can release this information to you. It is wise to make an appointment beforehand so that you do not spend hours waiting in line to get this information. You should also know that the estimated Social Security statement that you receive from your local SSA office only takes into account your past earnings record. They will not take into account any future earnings or wage increases. While this can give you a ballpark figure on your future benefit amount, it might not be quite as exact as some of the other methods available.


Obtain An Estimate Online

This is the easiest way to get an estimate of your Social Security income. You will simply need to register for your personal “my Social Security” account at Once you create your account, you will have access to a number of features including a retirement estimator. This benefit calculator allows you to estimate your retirement income, and it will even take into account your future earnings by making a few assumptions. You can simply adjust the numbers regarding your current salary and future wage increases, and the calculator will provide an estimate almost immediately. In addition to these calculators, you can also view your Social Security statement which shows your Social Security earnings history and other important information. To gain access, you will simply need to provide your Social Security number, date of birth, and a few other pieces of identifying information.


Calculate Your Benefits On Your Own

This is the most complicated way of determining how much Social Security pays you upon retirement. While it is much easier to use an online calculator, it is possible to calculate your benefit amount manually on your own. It requires a moderately complex computation based on your earnings history, retirement age, and a couple of other factors. We will dive into deep detail on how to perform this calculation in the next section.


Calculating Your Own Benefits

To calculate your benefit amount on your own, you will need to go through a few steps. You will also need to gather a few pieces of information regarding your past earnings. Here is what you need to do to perform your own calculation.

Determine Your AIME

The first step to performing your own calculation is determining your Average Indexed Monthly Earnings (AIME). Your earnings need to be indexed to account for inflation. This essentially means that your prior years of earnings need to be converted to value in today’s dollars. The indexing factors are found in the National Average Wage Index (NAWI) tables. So, how do you do this? The easiest way is to take a look at your Social Security statement. You will see a column that represents your indexed wage for each year. The Social Security Administration uses your highest 35 years of wages to determine benefits. So, take your 35 highest years of earnings and average those, then divide by 12 to arrive at your monthly indexed wage. If you do not have 35 years of earnings, then you will need to use zeros for some years to arrive at a total of 35 years. Once you have your AIME, then you can move on to the next step.


Calculate Your Bend Points

This step allows you to calculate your primary insurance amount (PIA). Social Security is set up so that lower income workers have a higher percentage of their wages replaced upon retirement. The more you earn, the lower the percentage of your working wages that you will receive. These different tiers, or bend points, are set by law. Here is how they work. Your PIA is calculated by finding the sum of 90% of your AIME up to $926, 32% of AIME between $926 and $5,583, and 15% of AIME above $5,583. For example, if you have an AIME of $800, then your PIA would be $720 per month. Now it is time to make any necessary adjustments to your PIA.


Make Necessary Adjustments To PIA

Adjustments to your PIA are done to account for cost of living adjustments and retirement age. If you wait to receive benefits until your full retirement age (FRA), then you will receive 100% of your benefits. However, if you choose to start your benefits early, then you will see a reduction in your benefits. In fact, waiting past full retirement age can allow you to see an increase in your PIA. Starting your benefits just a small number of months early can permanently reduce the benefits you will receive. So, it is always wise to wait until full retirement age if possible to start your benefits.

Are Your Benefits Taxable?

So, are your Social Security benefits taxable? The answer depends on what your total income for the year looks like. If your income is less than $25,000 as an individual taxpayer, then you will not owe income taxes on your Social Security benefits. The average Social Security benefit amount is about $18,000 per year, so most people will not owe taxes on their Social Security payout. For married couples, the income limit increases to $32,000. As your income increases, then you will start to owe taxes on your benefits. For single filers with income between $25,000 to $34,000, you will owe taxes on half of your benefits. The same applies for joint filers with income between $32,000 and $44,000. If you have an income above these tiers, then you will owe taxes on 80% of your benefits. This is the most that you will owe regardless of your income level.

When To Start Your Retirement Benefits

It is always a good idea to wait as long as possible to start your retirement benefits. The longer you wait, the higher your benefit amount will be. If you start your benefits before full retirement age (67 for most people), then you will see a fairly significant reduction in your benefits. If you can wait until age 70, then you can see an increase in your benefit amount. There is no reason to wait past age 70 as your benefit increases will stop there. So, you should decide when to start your benefits based on your own personal financial situation. If you are unsure, then you should talk to a financial planner to help you make that decision.

The Bottom Line

Calculating Social Security benefits is extremely important when you are planning for your retirement. While you could simply wait for your first Social Security check and allow the SSA to do all the calculations, there are a few ways that you can estimate your benefits before that first check arrives. You can use one of the online Social Security calculators, which is probably the easiest method. On the other end of the spectrum, you can gather all the necessary data and perform the calculation on your own. Regardless of which method you choose, you should definitely go ahead and verify your eligibility and estimate your benefits before you start to receive them.


Frequently Asked Questions

How is Social Security calculated if you work less than 35 years?

Social Security uses your highest 35 years of wages to determine your benefits. If you worked less than 35 years, then you will need to use zeros for the remaining years. For example, suppose you only have 30 years of Social Security earnings. When performing the calculation to determine your AIME, then you will need to use a zero for 5 years of that calculation. Having less than 35 years of work history can have a fairly significant negative impact on your benefit amount.

What are the factors that affect how much Social Security you will receive?

There are a few different factors that affect how much you receive. First, your earnings history is one of the largest contributing factors. Next, the age at which you start to receive benefits greatly affects the amount. If you start your benefits early, then they will be reduced. However, waiting past retirement age to start your benefits can actually make them increase. Earnings history and age are the two largest contributing factors to the amount of your benefits.


When does Social Security start to decrease?

Once you start your benefits, then they will not decrease. In fact, future cost of living adjustments might cause them to increase in the future. As for Social Security as a whole, it is fully funded through the year 2037. After that, it is possible that benefits might need to decrease in order for the SSA to continue making payments to benefit recipients.


What is the average monthly Social Security payment in the US?

Many people wonder, “How much Social Security will I get?” The average monthly payment to a retired worker is approximately $1,550 in 2021. For those receiving disability benefits, the payments are a little lower. The average of those payments is approximately $1,280 per month. As you can see, it would be very difficult to live on these payments alone. This is why many people must continue to work later in life and why it is imperative that you save on your own for retirement as well.

Elliot Marks

Elliot Marks

Elliot has spent years providing clear and concise information to help navigate the complex nuances of social security and many other government services in the United States. Elliot has a passion for helping those in need of these services to be able to find timely access to news and information that is relevant and helpful to their daily lives.