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.
How does my Social Security claiming age affect my monthly benefit amount?
Your Social Security claiming age has a direct and significant impact on your monthly benefit amount. You can start receiving benefits as early as age 62, but doing so will result in a permanently reduced monthly payment. Your full retirement age (FRA) – which is between 66 and 67, depending on your birth year – is the age at which you are eligible to receive your full primary insurance amount (PIA). If you delay claiming benefits beyond your FRA, up to age 70, you will earn delayed retirement credits, which permanently increase your monthly benefit amount for each month you wait.