How to Calculate Your Projected Social Security Benefit

Factors That Affect How Much You'll Get in Retirement

Woman reviewing her social security benefits
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Most retirees rely on Social Security. One in four gets 90% of their retirement income from the program. About half rely on it for 50% of their income.

Although Social Security is only one part of a secure retirement plan, it's helpful to get a rough idea of how much you can expect. If you're eligible for Social Security, your monthly benefit is based on two factors:

  • How much money you earned during your working career
  • The age you choose to start getting payments

Let's look at how each of these affects your future Social Security income.

Are You Eligible for Social Security?

To be eligible for Social Security benefits, you must earn at least 40 credits over your working career. How those credits are calculated is complex, but you will likely qualify if you have worked for at least 10 years.

You may be entitled to a spousal benefit because of your partner's work history. If your spouse, ex-spouse, or deceased spouse has earned 40 credits, you may qualify. The Social Security Administration (SSA) provides more info about this option.

But your work history is not only used as part of the qualification criteria; it is also used to figure out the amount of your payment. In calculating your monthly retirement benefit, the SSA considers your highest-earning 35 years of work history. If you worked for less than 35 years, the SSA will use zero for some years.

The higher your earnings over those 35 years, the greater your contribution to the program through FICA taxes, and the higher your benefit will be.

The same threshold applies to both your earnings and your benefits. This amount is $142,800 in 2021, and it will raise to $147,000 for the 2022 tax year.

When Will You Collect?

The SSA calculates your benefit amount at your full retirement age (FRA). This depends on the year you were born. FRA by birth year is:

  • 1943–1954: age 66
  • 1955: age 66 and two months
  • 1956: age 66 and four months
  • 1957: age 66 and six months
  • 1958: age 66 and eight months
  • 1959: age 66 and 10 months
  • 1960 and later: age 67

The monthly amount you are eligible to receive at your FRA is considered your full benefit, but it is not your minimum or maximum benefit.

You have the option to file for early retirement as early as age 62. But, you may choose to delay taking your benefits until as late as age 70.

There are many reasons why you might choose to take early retirement or to delay it. That choice has a direct impact on the amount of your monthly payment. If you opt for early retirement, you are choosing a lower monthly payment for the rest of your life. By choosing to delay your benefit to any age between your FRA and age 70, you lock in an increase.

An Example

Let's say that you were born in 1965. Your FRA is 67. If you retire in 2032, you will receive your full benefit. However, if you retire at age 62, in 2027, you will receive only 70% of that amount.

If you were born on the first of the month, the SSA calculates your benefit as if you were born during the previous month.

For this example, suppose that you earn the average annual salary for U.S. workers, per the latest data from the SSA. That would put your wages at $53,383.18 per year.

Using the SSA's Quick Calculator, you'll see that retiring at your FRA in 2032 would entitle you to $1,776 per month. However, retiring at 62 in 2027 would bring in $1,178 monthly. If you were to delay payments until age 70, you would receive $$2,249 each month—nearly double the amount you would get at early retirement.

Although your payment increases every year in retirement due to the yearly cost-of-living allowances, these increases are always based on the previous year’s amount. So once you take a reduced benefit, all of your future payments will be smaller.

How to Calculate Your Social Security Benefit

Calculating your estimated Social Security benefit is no easy task. Your best bet may be to request a Social Security benefits estimate (Form SSA-7004) from the SSA. This will contain an estimate of your benefit at age 62, at your FRA, and at age 70, based on your current work history.

In addition to these estimates, the SSA also has a series of Social Security benefits calculators that can help you plan for retirement. You can also use this calculator from AARP to estimate the best age to start claiming your benefits.

Frequently Asked Questions (FAQs)

What happens to unused Social Security benefits?

Any benefits you don't take during your lifetime will go into the Social Security trust funds, which are used for paying all Social Security recipients.

What income reduces Social Security benefits?

If you start taking Social Security benefits before you reach full retirement age, any income you earn over the annual limit until you reach full retirement age will lower your benefit eligibility for that year. In 2021, if you are retired and haven't reached full retirement age, the SSA will deduct $1 from your benefits for every $2 earned over $18,960. In the year you reach full retirement age, the SSA will deduct $1 for every $3 earned over $50,520. For the 2022 tax year, these thresholds are slightly higher, at $19,560 and $51,960, respectively.

How do I increase my Social Security benefits after retirement?

To increase your monthly benefit, don't start taking Social Security payments right when you reach full retirement age. The longer you wait, the more you'll get each month. If you want to get the highest possible amount of Social Security benefits each month, you need to wait until age 70 to retire.