Social Security is a vital aspect of millions of Americans’ retirement planning. In the case of some employees, there are exceptions, but for the most part, the majority of people have spent their working lives contributing to Social Security with a belief that it will provide them with guaranteed income when they retire.
Since Social Security tends to be so central to most retirees, one must understand what benefits they might get back from it. The time at which you apply for benefits is the main factor that determines how much you shall receive; hence, this understanding can be beneficial in making clearer financial decisions.
Estimating Your Benefit Amount
It can be hard to specifically calculate the amount of your future benefit if you’re still quite a few years away from retirement because of things like annual cost-of-living adjustments (COLA) and possible changes in salary. But by relying on average monthly benefits, one can have a rough idea about what they should expect and start making plans concerning their finances.
How Social Security Calculates Your Benefit
Monthly earnings are averaged over 35 years to determine social security benefits. The previous year’s income is adjusted for inflation in a process commonly referred to as indexing by Social Security. It is therefore possible to convert past incomes into values measured in US dollars today. After those amounts have been indexed, what happens next is that social security computes AIME, which means average indexed monthly earnings (AIME) from the quotient of total dollars divided by the number of months worked for the last thirty-five years. In case you do not have thirty-five years’ worth of income, zeroes will be accounted for the years you never worked.
Applying the Formula: Primary Insurance Amount (PIA)
Social Security uses a formula employing bend points that are mostly adjusted every year for calculating the primary insurance amount (PIA). Monthly benefits you would be entitled to if you opted for claiming Social Security at full retirement age.
Full Retirement Age and Early Claiming
Full retirement age (FRA) is dependent on one’s year of birth. For instance, those born between 1943 and 1954 have a FRA of 66. The earliest age at which one can claim their social security benefits is 62, though this should be done with an understanding that the total amount will decrease.
Born between 1943 and 1954: Full retirement age is 66
If you decide to start taking your benefits at the age of 62, your regular monthly payment will be less than the one you would receive if you wait until reaching a full retirement age. The table below represents how much percentage from the total benefit amount that you (and your partner) might get depending on when exactly you decide to begin getting them between ages 62 and my FRA.
How Your Social Security Benefit Is Reduced
| If you start getting benefits at age | And you are the wage earner; the benefit amount you will receive is reduced to | If you are the spouse, the benefit amount you will receive is reduced to |
| 62 | 75.0% | 35.0% |
| 62 + 1 month | 75.4 | 35.2 |
| 62 + 2 months | 75.8 | 35.4 |
| 62 + 3 months | 76.3 | 35.6 |
| 62 + 4 months | 76.7 | 35.8 |
| 62 + 5 months | 77.1 | 36.0 |
| 62 + 6 months | 77.5 | 36.3 |
| 62 + 7 months | 77.9 | 36.5 |
| 62 + 8 months | 78.3 | 36.7 |
| 62 + 9 months | 78.8 | 36.9 |
| 62 + 10 months | 79.2 | 37.1 |
| 62 + 11 months | 79.6 | 37.3 |
| 63 | 80.0 | 37.5 |
| 63 + 1 month | 80.6 | 37.8 |
| 63 + 2 months | 81.1 | 38.2 |
| 63 + 3 months | 81.7 | 38.5 |
| 63 + 4 months | 82.2 | 38.9 |
| 63 + 5 months | 82.8 | 39.2 |
| 63 + 6 months | 83.3 | 39.6 |
| 63 + 7 months | 83.9 | 39.9 |
| 63 + 8 months | 84.4 | 40.3 |
| 63 + 9 months | 85.0 | 40.6 |
| 63 + 10 months | 85.6 | 41.0 |
| 63 + 11 months | 86.1 | 41.3 |
| 64 | 86.7 | 41.7 |
| 64 + 1 month | 87.2 | 42.0 |
| 64 + 2 months | 87.8 | 42.4 |
| 64 + 3 months | 88.3 | 42.7 |
| 64 + 4 months | 88.9 | 43.1 |
| 64 + 5 months | 89.4 | 43.4 |
| 64 + 6 months | 90.0 | 43.8 |
| 64 + 7 months | 90.6 | 44.1 |
| 64 + 8 months | 91.1 | 44.4 |
| 64 + 9 months | 91.7 | 44.8 |
| 64 + 10 months | 92.2 | 45.1 |
| 64 + 11 months | 92.8 | 45.5 |
| 65 | 93.3 | 45.8 |
| 65 + 1 month | 93.9 | 46.2 |
| 65 + 2 months | 94.4 | 46.5 |
| 65 + 3 months | 95.0 | 46.9 |
| 65 + 4 months | 95.6 | 47.2 |
| 65 + 5 months | 96.1 | 47.6 |
| 65 + 6 months | 96.7 | 47.9 |
| 65 + 7 months | 97.2 | 48.3 |
| 65 + 8 months | 97.8 | 48.6 |
| 65 + 9 months | 98.3 | 49.0 |
| 65 + 10 months | 98.9 | 49.3 |
| 65 + 11 months | 99.4 | 49.7 |
| 66 | 100.0 | 50.0 |
To have a better understanding of the full retirement age (FRA) you can read other topics such as Social Security Changes in 2025: This Will Be the Full Retirement Age (FRA) Based on Your Year of Birth, Social Security Full Retirement Age (FRA): How do I know when I have to retire to receive the maximum benefit? and What is Full Retirement Age (FRA) for Social Security and which is my benefit by year of birth in 2024?
