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 is the difference between my full retirement age and the earliest age I can claim Social Security?
Your full retirement age (FRA) is the age at which you are eligible to receive 100% of your calculated Social Security benefit. This age varies depending on your birth year, generally falling between 66 and 67. The earliest age you can claim Social Security retirement benefits is age 62. However, if you claim before your FRA, your monthly benefit amount will be permanently reduced. The reduction is calculated based on how many months you claim early.