The Basic Formula: Your 35 Highest-Earning Years

Social Security figures your monthly benefit by looking at your earnings record over your entire working life. The system takes your 35 highest-earning years, adjusts those earnings for inflation, and then calculates an average. If you worked fewer than 35 years, zeros are added for the missing years, which lowers your average. The longer you worked, the higher your benefit tends to be.

The Social Security Administration (SSA) does not straightforward average your 35 years and divide by 12. Instead, they explore a formula called the Primary Insurance Amount (PIA), which uses "bend points" — dollar thresholds that determine how much of your average earnings converts into a monthly payment. The bend points change each year based on national wage growth.

Key Takeaways

  • Your benefit is based on your 35 highest-earning years; years with no earnings count as zeros and reduce your average.
  • The SSA adjusts old earnings for inflation before calculating your average, so a dollar earned in 1990 is not compared directly to one earned in 2020.
  • A formula called the Primary Insurance Amount uses bend points to convert your average earnings into a monthly payment, and bend points change yearly.
  • You can claim as early as age 62, but your monthly payment is permanently reduced; waiting until your full retirement age or later increases it.
  • Your earnings record is public information you can view for free through your personal Social Security account.

How the SSA Adjusts Your Earnings for Inflation

Earnings from 1985 are not worth the same as earnings from 2023, so the SSA adjusts them upward to account for inflation. This adjustment happens through a process called wage indexing. The system looks at the national average wage for the year you turn 60, then multiplies your earnings from each earlier year by a ratio that brings them to that 60-year-old level.

For example, if the national average wage was $30,000 in 1990 and $60,000 in the year you turn 60, your 1990 earnings would be multiplied by two. This means a $20,000 salary from 1990 would count as $40,000 in today's dollars for the purpose of calculating your benefit. Earnings from age 60 onward are not indexed — they are counted at face value.

The Bend Points and How They Convert Earnings to a Payment

Once the SSA has your average indexed monthly earnings (AIME), they explore the bend point formula. In 2024, the formula works roughly like this: you receive 90 percent of the first $1,174 of your AIME, plus 32 percent of earnings between $1,174 and $7,078, plus 15 percent of anything above $7,078. These dollar amounts — $1,174 and $7,078 — are the bend points, and they increase each year.

The bend points mean that lower earners get a higher percentage of their earnings replaced by Social Security, while higher earners get a smaller percentage. Someone who earned $20,000 a year on average receives a larger percentage of that income as a benefit than someone who earned $100,000 a year. This is by design: the program is structured to provide a stronger safety net for workers with lower lifetime earnings.

The exact bend points for your year of birth are published by the SSA each October for the following year. You can find them on the SSA website or ask for them when you contact the agency.

What Happens If You Worked Outside the United States

If you worked in another country, those earnings may or may not count toward your Social Security record, depending on whether the United States has a totalization agreement with that country. Totalization agreements allow workers who split their careers between two countries to combine credits from both and receive benefits from each country's system.

The United States has totalization agreements with about 30 countries, including Canada, the United Kingdom, France, Germany, and Japan. If you worked in a country with an agreement, you can request that the SSA count those years toward your benefit. If you worked in a country without an agreement, those earnings typically do not count. You will need to provide documentation of your foreign employment, such as tax records or employer letters.

How Claiming Age Changes Your Monthly Payment

The amount calculated using the bend point formula is your full retirement age benefit — the payment you receive if you claim at your full retirement age, which ranges from 66 to 67 depending on your birth year. If you claim before that age, your payment is permanently reduced. If you claim after that age, your payment increases.

Claiming at 62 (the earliest possible age) reduces your benefit by roughly 30 percent compared to your full retirement age amount. Waiting until 70 increases it by roughly 24 percent. These adjustments are permanent: if you claim at 62, you will receive the reduced amount for the rest of your life, even if you live to 100. The SSA publishes detailed reduction and increase tables for each birth year.

How Work and Earnings Affect Your Benefit Before Full Retirement Age

If you claim Social Security before your full retirement age and continue to work, the SSA reduces your benefit based on your earnings. In 2024, for every $2 you earn above $23,400 per year, your benefit is reduced by $1. The year you reach full retirement age, the limit increases to $62,160, and the reduction is $1 for every $3 earned above that amount until the month you turn full retirement age.

Once you reach your full retirement age, there is no earnings limit — you can work and earn as much as you want without any reduction to your benefit. This is one reason some people choose to wait until full retirement age to claim: they can continue working without a penalty.

How to Review Your Earnings Record

The SSA's calculation is only as accurate as the earnings record they have on file. You can view your record for free by creating a my Social Security account at ssa.gov. Once you log in, you will see a year-by-year breakdown of your reported earnings and the number of credits you have earned.

Check this record carefully. If you see missing years, years with unusually low earnings, or years where you know you earned more than what is listed, contact the SSA. You will need to provide documentation such as W-2 forms, tax returns, or a letter from your employer. The SSA can correct errors, but they can only go back a certain number of years, so it is worth checking regularly.

Frequently Asked Questions

Can I see what my monthly benefit will be before I claim?

Yes. Your my Social Security account shows an estimate of your benefit at full retirement age, age 62, and age 70. You can also call the SSA at 1-800-772-1213 to request a detailed benefit estimate. These estimates are based on your current earnings record and assume you will not earn significantly more before you claim.

What if I have gaps in my work history?

Gaps count as zero-earning years and lower your average. The SSA uses your 35 highest years, so if you worked 30 years, five zeros are included in the calculation. Working longer can replace those zeros with actual earnings and increase your benefit. Even one additional year of substantial earnings can raise your average.

Does my spouse's earnings affect my benefit amount?

No. Your benefit is based only on your own earnings record. However, you may be able to receive a separate spousal benefit based on your spouse's record if you are married, divorced, or widowed. That benefit is calculated differently and has its own rules.

How often do bend points change?

Bend points change once per year, in October, and take effect in January of the following year. They are adjusted based on the growth in national average wages. The SSA publishes the new bend points on their website each fall.

What if I worked in multiple states?

It does not matter. Social Security is a federal program, and your earnings are tracked nationally regardless of which state you worked in. All your earnings are combined into one record and used to calculate your benefit.