Social Security how is it figured

We have so many friends and relative’s question on how Social Security is figured. I suggest they go talk to the Social Security local office in their town to get the facts. I also show them our yearly recap we get from the Social Security Administration. If you don’t get one each year just sign up on their website or go to your local Social Security Office.

Here is a link to go see your Social Security Statement –

This is from a Social Security Statement  – “Are you thinking about retirement? Are you ready for retirement? We have tools that can help you! • Estimate your future retirement benefits at • Apply for retirement, spouse’s, Medicare, or disability benefits at • And once you receive benefits, manage your benefits at

Social Security Statement

Your Social Security Statement tells you about how much you or your family would receive in disability, survivor, or retirement benefits. It also includes our record of your lifetime earnings. Check out your earnings history, and let us know right away if you find an error. This is important because we base your benefits on our record of your lifetime earnings. Social Security benefits are not intended to be your only source of income when you retire.

On average, Social Security will replace about

40 percent of your annual pre-retirement earnings. You will need other savings, investments, pensions, or retirement accounts to live comfortably when you retire. To see your Statement online anytime, create a my Social Security account at”

The Motley Fool also said – “The amount of Social Security benefits you receive is based on your work history, both years and earnings.

The SSA considers your wages over the 35 years during which you earned the most money, up to the annual payroll tax cap. There’s a tax cap because there’s also a limit on how much you can receive in benefits.

Your wages over your 35 most profitable years are adjusted for inflation, added together and then divided by 420 months (the number of months in 35 years). This calculation gives you a figure called average indexed monthly earnings, or AIME.  Then, the SSA uses a formula to determine your primary insurance amount, based on your AIME. For 2019, your primary insurance amount equals 90% of the first $926 of AIME, plus 32% of AIME above $926 and below $5,583, plus 15% of your AIME above $5,583.

The income threshold at which you get a smaller percentage of AIME is called the “bend point.” Bend points change annually, but the bend points that determine your benefits are those in effect when you turn 62, regardless of how old you are when you retire. 

Understanding this formula is important for one big reason: The SSA considers the most profitable 35 years of your life, based on your earnings. So, if you worked fewer than 35 years, the SSA will still look at 35 years worth of work history — and factor in $0 annual earnings for the years you didn’t work. These zeroes can significantly reduce your AIME, which in turn substantially drags down your benefit amount. 

For this reason, you might consider working a few more years if you don’t have 35 work years on your record. Or, if you’re earning much more now than you were at the start of your career, you may decide to stay on an for a few extra years so your early lower earning years are replaced your later high-earning years, when you were in the prime of your career.”

I have made my own spreadsheet that has my top 35 years income and then play with if I would go back to work and replace some of the lower years how much would it effect my monthly benefit. For me it hardly makes a difference.

Mrs. RE and myself both still want to wait till we are age 70 to claim our Social Security Benefits. I know we can’t predict the future but in a perfect world that is our plan. I always suggest for yourself and other people to also see your own financial planner and financial team to see what is best for you situation.

Here is a positive quote I like; “Remind yourself daily that there is no way to happiness; rather, happiness is the way.” ― Wayne W. Dyer, Change Your Thoughts – Change Your Life: Living the Wisdom of the Tao

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