Your Retirement Benefit: How It's Figured

As you make plans for your retirement, you may ask, "How much will I get from Social Security?" If you have a personal my Social Security account, you can get an estimate of your personal retirement benefits and see the effects of different retirement age scenarios. If you don't have a personal my Social Security account, you can create one at www.ssa.gov/myaccount. A personal my Social Security account also gives access to the online Social Security Statement. In the statement, a bar graph estimates for up to nine ages when you may want to start benefits.

Many people wonder how Social Security figures the retirement benefit, they:

Adjust or "index" your actual earnings to account for changes in average wages since the year the earnings were received.

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."

You can choose to get benefits before your full retirement age. You can begin to receive Social Security benefits as early as age 62, but at a reduced rate. Social Security reduces your basic benefit by a certain percentage if you retire before reaching full retirement age. You can find your full retirement age at www.ssa.gov/planners/retire/retirechart.html.

You're eligible for cost-of-living benefit increases starting with the year you turn age 62. This is true even if you don't get benefits until your full retirement age or even age 70. Social Security adds cost-of-living increases to your benefit beginning with the year you reach 62. Benefits are adjusted yearly to reflect the increase, if any, in the cost-of-living as measured by the Consumer Price Index.

You delay your retirement past your full retirement age. Social Security increases your Social Security benefits incrementally each month that you delay receiving benefits after your full retirement age until you reach age 70.

You're a government worker with a pension. In certain circumstances, Social Security applies a different formula to your average indexed monthly earnings. This applies if you also get, or are eligible for, a retirement or disability pension from work for which you didn't pay Social Security taxes. This work is usually a government job or a job in a foreign country. To find out how the Windfall Elimination Provision (WEP) affects your benefits, go to www.ssa.gov/gpo-wep and use the WEP online calculator. You can also review the WEP fact sheet online or read Windfall Elimination Provision (Publication No. 05-10045) to find out how Social Security figures your benefit. Or, you can contact Social Security and ask for it.