Social Security retirement benefits are calculated using your highest 35 years of indexed earnings, not just your recent income.
The Social Security Administration (SSA) determines your monthly 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 over time. Then, a formula is applied to your AIME to arrive at your primary insurance amount (PIA), which is the benefit you would receive if you start claiming at your full retirement age. Finally, your benefit is adjusted based on the age you choose to begin receiving payments.
This information provides a general overview of how Social Security benefits are calculated and does not constitute financial advice.
What factors influence the accuracy of my Social Security retirement benefit estimate?
The accuracy of your Social Security retirement benefit estimate depends primarily on the completeness and accuracy of your earnings record with the Social Security Administration (SSA). If your reported earnings are correct and you have worked consistently, the estimate will be quite reliable. However, discrepancies in reported wages, missing years of work, or changes in your future earning patterns can affect the estimate. Estimates are based on current law and your projected earnings until retirement age.