Your benefit is based on your 35 highest-earning years, adjusted for inflation

Social Security calculates your monthly benefit by looking at your earnings record from the year you turned 22 until the year you claim. The formula takes your 35 highest-earning years, adjusts each year's earnings for inflation using a national wage index, and then applies a formula that gives you a larger percentage of your early earnings and a smaller percentage of your later ones. If you worked fewer than 35 years, zeros are added for the missing years, which lowers your average.

The Social Security Administration (SSA) publishes your earnings record in your online account at ssa.gov. You can view what they have on file for each year you worked. This record is what they use to calculate your benefit, so checking it for errors matters — if your employer reported your wages incorrectly or under a different name, your benefit will be lower than it should be.

Your benefit amount also depends on the age you claim. If you claim at your full retirement age (which ranges from 66 to 67 depending on your birth year), you receive your Primary Insurance Amount, or PIA. If you claim earlier, your benefit is reduced. If you claim later, your benefit increases by about 8 percent per year until age 70.

Key Takeaways

  • Social Security uses your 35 highest-earning years to calculate your benefit, with each year's earnings adjusted for inflation before the formula is applied.
  • If you worked fewer than 35 years, the SSA counts zeros for the missing years, which reduces your average and your monthly benefit.
  • You can view your earnings record on your ssa.gov account to check whether your employer reported your wages correctly.
  • Your monthly benefit amount changes based on when you claim: it is reduced if you claim before full retirement age and increased if you claim after.
  • The SSA sends you a benefit estimate statement that shows what you could receive at different claiming ages.

The three-step formula that turns your earnings into a monthly amount

The SSA uses a three-step process. First, they take your earnings from each year you worked, find the national average wage index for that year, and adjust your actual earnings upward or downward based on how wages changed nationally. This step is called wage indexing, and it makes sure that someone who earned $20,000 in 1985 is not treated the same as someone who earned $20,000 in 2023.

Second, they select your 35 highest indexed earnings years and add them together, then divide by 420 (the number of months in 35 years) to get your Average Indexed Monthly Earnings, or AIME. This is the single number that drives your benefit calculation.

Third, they explore a bend-point formula to your AIME. The formula multiplies the first portion of your AIME by 90 percent, the next portion by 32 percent, and any amount above that by 15 percent. The bend points (the dollar amounts where the percentages change) are adjusted each year for wage growth. For someone born in 1960 or later, the 2024 bend points are $1,174 and $7,078. This formula is why lower earners receive a higher percentage of their pre-retirement income than higher earners do.

How your earnings record is built and what counts toward 40 credits

To receive any Social Security benefit, you must have earned 40 credits. You earn one credit for each $1,632 of wages you report to Social Security in 2024 (this amount changes yearly). You can earn up to four credits per year, so you need at least 10 years of work to reach 40 credits. The SSA counts only wages you reported to them — self-employment income, cash payments, or work that was never reported does not count.

Your earnings record shows the wages reported to Social Security under your name and Social Security number for each year. If you worked under a different name (for example, before marriage), those wages may appear under your old name and number. If your employer made a mistake or reported your wages late, the SSA may not have them on file yet. You can request a corrected record by filing Form SSA-7008 with the SSA, but you generally have only three years, three months, and 15 days after the year in which you earned the wages to correct them.

Self-employed people report their net earnings on Schedule SE of their tax return, and the SSA pulls that information from the IRS. If you underreported your income on your taxes, your Social Security record will reflect that lower amount.

Why working longer can increase your benefit

If you work past age 62, you may replace one of your lower-earning years with a higher-earning year. The SSA recalculates your benefit each year you continue to work and earn wages. If your new year's earnings are higher than one of your 35 indexed years, that new year replaces the lowest one in the calculation, and your benefit goes up.

This is separate from the delayed retirement credits you earn by not claiming until after your full retirement age. Delayed credits increase your benefit by about 8 percent per year from your full retirement age until age 70. If you work longer and earn more, you get both the benefit of a higher average (from the recalculation) and the benefit of delayed credits (from waiting to claim).

However, if you claim before your full retirement age and continue to work, the SSA reduces your benefit by $1 for every $2 you earn above an annual limit. For 2024, that limit is $23,400. In the year you reach full retirement age, the reduction is $1 for every $3 earned above a different limit ($62,160 for 2024), and only earnings before the month you reach full retirement age count toward the limit. Once you reach full retirement age, there is no earnings limit and no reduction.

How inflation adjustments work in the formula

The SSA adjusts your past earnings for inflation using the national average wage index, which is published each year by the SSA. This index reflects the average wage earned by all workers in the United States. When you turn 60, the SSA stops wage-indexing your earnings — any wages you earn after age 60 are counted at face value, not adjusted upward.

Your monthly benefit amount itself is also adjusted each year for cost-of-living increases. The SSA calls this the Cost-of-Living Adjustment, or COLA. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and is announced in October for the following year. In years when inflation is low or negative, the COLA may be zero or very small. In years with high inflation, the COLA is larger.

Differences in how benefits are calculated for different claiming situations

If you claim Social Security as a retired worker, the calculation described above applies. If you claim as a spouse, widow, or widower, the SSA calculates your benefit differently. Spousal benefits are typically 32.5 to 50 percent of the primary earner's full retirement age benefit, depending on your age when you claim. Widow and widower benefits are up to 100 percent of what the deceased worker was receiving or would have received. These benefits are not based on your own earnings record but on the earnings record of the person you are related to.

If you are self-employed, your net earnings from self-employment are subject to the same Social Security tax as wages, and they count toward your 40 credits and your earnings record in the same way. However, you report them on your tax return, and the SSA receives them from the IRS, so there can be a delay between when you file your taxes and when the earnings appear on your Social Security record.

What your benefit estimate statement tells you

The SSA sends you a benefit estimate statement (called a "Social Security Statement") that shows your earnings record and estimates what you could receive at different ages. You can also view this statement in your online account at ssa.gov. The statement shows your Primary Insurance Amount (your benefit at full retirement age), what you would receive if you claimed at 62, and what you would receive if you claimed at 70.

The estimates on the statement assume you continue to work and earn about the same amount until you claim. If your future earnings are significantly higher or lower, your actual benefit will differ from the estimate. The statement also shows your earnings record year by year, which is where you can spot errors or missing wages.

Frequently Asked Questions

What happens if I did not work for 35 years?

The SSA counts zeros for any year you did not work (up to 35 years total). These zeros lower your average indexed monthly earnings and reduce your benefit. If you worked 30 years, five zeros are included in the calculation. Working longer and replacing those zeros with actual earnings can increase your benefit.

Can I see how much my benefit will be before I claim?

Yes. Your benefit estimate statement on ssa.gov shows what you could receive at ages 62, full retirement age, and 70, based on your current earnings record. You can also call the SSA at 1-800-772-1213 to request an estimate. These are projections, not guarantees, and assume you continue working at a similar earnings level.

Does my benefit change after I start receiving it?

Your monthly benefit amount increases each year by the Cost-of-Living Adjustment (COLA), which is based on inflation. The COLA is announced in October and takes effect in January. Your benefit does not recalculate based on new earnings once you have claimed, except in rare circumstances involving corrections to your earnings record.

What if my employer reported my wages wrong?

You can request a correction by filing Form SSA-7008 with the SSA. You generally have three years, three months, and 15 days after the year you earned the wages to correct them. Bring your W-2 or tax return as proof. If the important date has passed, you may still be able to correct the record if you have evidence of the error.

Does my benefit go down if I work after I start claiming?

If you claim before full retirement age and earn more than the annual limit ($23,400 in 2024), your benefit is reduced by $1 for every $2 you earn above the limit. Once you reach full retirement age, there is no earnings limit and no reduction, even if you continue working.