Your monthly Social Security retirement benefit is calculated using your highest 35 years of inflation-adjusted earnings, a specific formula, and your age when you begin receiving benefits.
The Social Security Administration (SSA) determines your retirement benefit by first calculating your average indexed monthly earnings (AIME) over your highest 35 years of earnings. These earnings are adjusted for inflation to reflect their value in today's dollars. Then, a formula is applied to your AIME to arrive at your primary insurance amount (PIA), which is the benefit you would receive at your full retirement age. Finally, your benefit amount is adjusted based on whether you start receiving benefits before, at, or after your full retirement age.
This information provides a general overview of how Social Security retirement benefits are calculated and does not constitute financial advice.
What happens if I have fewer than 35 years of earnings for Social Security?
If you have fewer than 35 years of earnings recorded with the Social Security Administration, any year for which you have no earnings will be counted as a zero in the calculation of your average indexed monthly earnings (AIME). This means that those zero-earning years will lower your overall average, potentially reducing your monthly retirement benefit. Social Security looks at your entire earnings record, but it specifically uses the 35 highest years. If you have fewer than 35 years of work history, the remaining years will be filled in with zeros, impacting your average.