Social Security retirement benefits: how they are calculated
Key takeaways
04 · ideas- Benefits are based on your highest 35 earning years, indexed for inflation
- Full Retirement Age (FRA) is 66 or 67 depending on birth year
- Claiming at 62 permanently reduces benefits by up to 30%
- Delaying to age 70 increases benefits by 8% per year beyond FRA
Basic level
The essentials · 2 min
Social Security retirement benefits are calculated from your earnings history.
AIME: Your highest 35 years of indexed (inflation-adjusted) earnings are averaged to get the Average Indexed Monthly Earnings.
PIA formula (2024): The AIME is converted to a Primary Insurance Amount using a progressive formula:- 90% of the first $1,174 of AIME
- 32% of AIME between $1,174 and $7,078
- 15% of AIME above $7,078
This structure replaces a higher percentage of income for lower earners than for higher earners.
Intermediate level
How it applies · 2 min
Claiming age adjustments
Full Retirement Age (FRA):- Born 1943-1954: FRA = 66
- Born 1960 or later: FRA = 67
| Claiming age | Benefit vs. FRA benefit (FRA = 67) |
|---|---|
| 62 | 70% |
| 65 | 86.7% |
| 67 (FRA) | 100% |
| 70 | 124% |
Delayed retirement credits add 8% per year beyond FRA, up to age 70.
Break-even: Delaying from 62 to 70 results in higher lifetime benefits if you live past approximately age 80-82.
Spousal and survivor benefits
A non-working spouse can claim up to 50% of the worker's FRA benefit. Survivor benefits can be up to 100% of the deceased worker's benefit.
Advanced level
The math, step by step · 1 min
Windfall Elimination Provision
Workers who receive a pension from jobs not covered by Social Security (some state, local, and federal positions) may have benefits reduced under the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). The Social Security Fairness Act of 2024 repealed both WEP and GPO effective for benefits payable after December 2023.