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We illustrate the calculation of retirement benefits using two examples, labeled case A and case B. In each case, the worker retires in 2025. Case A, born in 1963, retires at age 62. Case B, born in 1959, retires at his normal (or full) retirement age.
Social Security recalculates your benefit annually, adjusting for inflation and figuring in the previous year’s income. If your previous year’s income ranks in your top 35 years of earnings, Social Security will shove aside a lower-earning year.
The Social Security benefits calculation uses your highest 35 years of earnings to calculate your average monthly earnings. If you do not have 35 years of earnings, a zero will be used in the calculation, which will lower the average.
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).
Calculate your average indexed monthly earnings during the 35 years in which you earned the most. Apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount.” This is how much you would receive at your full retirement age — 65 or older, depending on your date of birth.
Social Security benefits are based on a formula that considers your income during your 35 highest-earning years. You can claim benefits early at 62 or delay until 70 to increase the monthly...
At this point you’ll be given an estimate of your benefits, but if you’d like to calculate it manually, you’ll need to identify your top earning years. Add up your earned income from each of the 35...